A skeptical view of the economic situation: Timo Wollmershäuser, head of economic activity at the Ifo Institute. Picture Alliance
The German economy is coming out of the recession only very slowly. Inflation is also staying tough. With this diagnosis, the Ifo Institute lowers its forecast for the economy in Germany.
Economists are now assuming that economic output will shrink by 0.4 percent for the whole of 2023. Inflation is dropping to an average of 5.8 percent.
For the coming year, Ifo lowered the forecast to just 1.5 percent growth. Many economists now consider the lack of momentum to be more dangerous than the current recession.
The German economy is coming out of the recession only very slowly. There is also a lack of momentum in the medium term, and growth remains weak. Inflation will remain tough this year. With this diagnosis, that lowered Ifo-Institute his forecast for the German economy. The economists now expect that economic output will also shrink noticeably in the whole of 2023 at minus 0.4 percent.
For the coming year, too, the researchers only expect modest growth of 1.5 percent. The institute lowered its forecast for both years by 0.2 to 0.3 percentage points compared to spring. Inflation will slowly fall from 6.9 percent in 2022 to 5.8 percent this year and then to 2.1 percent in 2024. “The German economy is only slowly working its way out of the recession,” said Ifo economic chief Timo Wollmershäuser Wednesday in Berlin.
Wollmershäuser emphasized that the current recession can no longer be described as mild. In the past six months, economic output in Germany has shrunk by 0.9 percent. “We are clearly at the bottom of the table,” said the economist. In Europe, only the economy in Hungary is similarly strong and the Czech Republic has shrunk slightly. All other countries also recorded growth in the winter half-year.
This year, weak private consumption in particular is dampening demand. “Because of the high inflation, private consumption will fall by 1.7 percent this year. It will not increase again until 2024,” said Wollmershäuser. Construction investments will shrink even faster, after minus 1.8 percent last year, it will be minus 2.2 percent this year and minus 3.2 percent in 2024. The increase in construction prices is only going down slowly and interest rates on loans will remain high. The construction situation will continue to deteriorate. The rest of industry, on the other hand, is still benefiting from its well-filled order books and the gradual end to supply bottlenecks. It can therefore grow much more vigorously again.
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Economists lower forecasts for the German economy
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