GCEE expects German GDP to grow by 0.2% in 2023

The short-term downside risks to economic growth have declined, a GCEE press release said.

Most notably, uncertainty about energy supplies has receded for the time being, leading to a decline in wholesale energy prices. Although the energy supply situation has eased for the time being, the energy crisis is not over.

Inflation—as measured by the German consumer price index (CPI)—fell from 8.8 per cent year on year (YoY) to 8.1 per cent in December last year. It climbed back to 8.7 per cent in January and February 2023.

Core inflation has continued to rise YoY and amounted to 5.6 per cent and 5.7 per cent in January and February this year respectively. This suggests that inflation will decline only gradually and remain elevated throughout the forecast horizon, GCEE noted.

It forecasts 6.6 per cent and 3 per cent inflation this year and next year respectively.

In the short term, the inflation-induced loss of purchasing power remains the main burden for the economy in Germany and most other euro area member states, it added.

ALCHEMPro News Desk (DS)