Germany's price-adjusted GDP to fall by 0.4% in 2023: ifo Institute

In recent months, the mood in the German economy has clouded over noticeably. Virtually no sector has been spared.

Contrary to expectations in the summer, the recovery is therefore unlikely to materialise in the second half of the year and the economic slowdown is likely to continue.

In the next two years, economic output is expected to increase by 1.4 per cent and 1.2 per cent. The inflation rate will fall further from an average of 6 per cent this year to 2.6 per cent next year and 1.9 per cent the year after, the institute said in a factsheet.

Despite a steep drop in energy prices, there has so far been no significant turnaround in production in Germany’s energy-intensive industries.

Demand for industrial goods in key sales markets will remain weak and pick up again only towards the end of the year. Private consumption is expected to recover gradually in the second half of the year.

The weakness in Germany’s economy will largely bring employment growth to a standstill and initially drive a further increase in unemployment. The unemployment rate will average 5.6 per cent this year and next—0.3 percentage points higher than in 2022. The rate is not expected to fall back to 5.3 per cent until 2025.

Germany’s budget deficit will narrow only slightly in the next two years to 1.9 per cent and 1.6 per cent of economic output, respectively, compared with 2.2 per cent this year.

ALCHEMPro News Desk (DS)