FLASH
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Inflation has reduced consumers' desire to buy. This is also reflected in the macroeconomic forecasts.
High inflation, a weak global economy and higher interest rates will cause the German economy to shrink this year, according to forecasts from Germany's leading economic research institutes. The gross domestic product is expected to fall by 0.3 percent, predicts the Institute for the World Economy (IfW) in the analysis for the summer published on 15.06. In the spring it was still assumed that there would be an increase of 0.5 percent.
The Essen-based RWI Institute also cut its forecast from plus 0.2 to minus 0.3 percent, while the DIW institute in Berlin expects a minus of 0.2 percent. By comparison: the federal government expects growth of 0.4 percent. For next year, institutes now expect growth of up to 2.0 percent.
"Starting from the severe crisis and the ban on oil and gas supplies from Russia, the German economy is doing well, confirming its ability to quickly adapt to new circumstances," said IfW president Moritz Schularick. "But it is also clear that the energy crisis has left its mark". However, the outlook for the economy is better than the negative annual rate suggests, he added.
German economy stuck in recession
Gross domestic product contracted at the end of 2022, continuing into the first quarter of 2023. Germany - Europe's largest economy - is stuck in recession. According to a study, the risk of a summer recession has increased significantly. From June to the end of August, the probability of a recession has increased to 49.3 percent, said the Institute for Macroeconomic Research and the Business Cycle (IMK), which is close to the unions.
At the height of the recession, it was still 37.6 percent. "The apparent repeated increase in the probability of recession indicates that economic output in Germany is at best stagnating in the second quarter," said IMK economics expert Peter Hohlfeld.
Despite the economic downturn experts from the Institute for the World Economy (IfW) based in Kiel expect the labor market to remain strong. The number of employed persons is expected to increase by more than 350,000 this year. The unemployment rate will rise to 5.6 percent, but next year it will fall back to the 2022 level of 5.3 percent./ DW
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