The gross domestic product (GDP) is expected to increase by 0.3 percent, according to the outlook published on Thursday by the Institute for the World Economy (IfW).
(Photo: dpa)
Berlin The forecasts for the performance of the German economy in the coming year are becoming more and more optimistic: In contrast to most other institutions, the Kiel-based IfW is now even predicting growth.
The gross domestic product (GDP) is expected to increase by 0.3 percent, according to the outlook published on Thursday by the Institute for the World Economy (IfW). In September it had still expected a decline of 0.7 percent.
The Munich Ifo Institute had previously raised its forecast for 2023, but is still assuming a mini minus of 0.1 percent. The Federal Government, the International Monetary Fund (IMF) and the Organization of Industrialized Nations (OECD) are also expecting a decline in economic output. The Association of German Chambers of Industry and Commerce (DIHK) is even expecting a drop of three percent.
“The prospects for the economy have brightened somewhat – with a high level of uncertainty,” explained the Kiel researchers. The decisive factor is that private consumption will suffer far less from the energy crisis than previously feared.
Top jobs of the day
Find the best jobs now and
be notified by email.
“Wholesale prices for gas and electricity have fallen significantly in recent months – even if they are still at a high level,” it said. “In addition, the burdens on private households and companies caused by the high energy costs are to be cushioned by so-called price brakes.” Therefore, the inflation rate in the coming year will be significantly lower at 5.4 percent than previously predicted at 8.7 percent. For the year that is coming to an end, it should be 8.0 percent, and then 2.2 percent in 2024.
Purchasing power of households weighed down
However, the economists are not giving the all-clear. “The German economy is facing a weak winter half-year,” they wrote, with a view to the expected recession in the current and coming quarters. Germany is moving “in crawling gear through the energy crisis”.
Definition: What is a recession?
The high energy prices weighed on the purchasing power of households. Therefore, private consumption will only pick up again in the second half of 2023. However, companies are likely to invest more and exports will increase slightly despite the difficult global environment. The IfW predicts economic growth of 1.3 percent for 2024, and 1.9 percent by the end of the year.
>> Read here: Economy needs morality – The latest scandals are shaking the population’s confidence
According to the forecasts, the labor market is proving to be robust, also because companies are still desperately looking for skilled workers. The government deficit is likely to increase to around four percent of GDP in the coming year due to the aid packages.
More: Survey – Sentiment among German companies in China at an all-time low