Germany’s recession will be sharper than expected: Ifo
THE German economy will contract more than previously expected this year as sticky inflation takes its toll on private consumption, the Ifo Institute said while presenting its forecasts.
“The German economy is only very slowly working its way out of the recession,” said Timo Wollmershaeuser, Ifo’s head of economic forecasts on Wednesday (Jun 21).
German gross domestic product is expected to fall by 0.4 per cent this year, more than the 0.1 per cent forecast by Ifo in March. The economic institute has also cut the forecasts for Germany in 2024 to 1.5 per cent GDP growth, down from the 1.7 per cent it previously expected.
“When we compare Germany with our main trading partners, these countries are at least expected to post growth,” Wollmershaeuser said. Ifo anticipates eurozone GDP to expand by 0.6 per cent this year, and US GDP by 0.9 per cent.
Inflation is forecast to ease slowly from 6.9 per cent in 2022 to 5.8 per cent this year, down to 2.1 per cent in 2024. Ifo forecasts that core inflation will increase to 6 per cent this year from 4.9 per cent in the previous year, before falling to 3 per cent in 2024.
Due to inflation, private consumption will fall by 1.7 per cent this year, the economic institute said, adding that the figure will not rise again until 2024, when it is expected to post a 2.2 per cent increase.
Ifo also said the number of unemployed people will rise slightly in 2023, but the unemployment rate will remain unchanged from 2022, at 5.3 per cent this year, rising to 5.5 per cent in 2024.
New government borrowing will fall from 106 billion euros (S$155.5 billion) in 2022 to 69 billion euros this year and 27 billion euros next year, according to Ifo’s estimates.
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