ifo Economic Forecast Summer 2023: German Economy to Shrink by 0.4 Percent in 2023
Germany’s economic output will shrink by 0.4 percent this year, according to the ifo Institute’s latest forecast. In spring, the Institute had expected a decline of only 0.1 percent. The researchers predict an increase of 1.5 percent next year, adjusted from their previous estimate of 1.7 percent. Inflation will slowly decline from 6.9 percent in 2022 to 5.8 percent this year and then to 2.1 percent in 2024. “The German economy is only very slowly working its way out of the recession,” said Timo Wollmershäuser, Head of Forecasts at ifo, in Berlin on Wednesday.
“Private consumption will decrease by 1.7 percent this year due to high inflation. Only in 2024 will it increase again, by 2.2 percent.” Construction investment will shrink even faster, from minus 1.8 percent last year to minus 2.2 percent this year and minus 3.2 percent in 2024. The rise in construction prices is tapering off only slowly and interest rates on loans will remain high, further subduing demand for construction services. Thanks to high order backlogs, manufacturing is expected to continue to expand its output moderately and then significantly more strongly again as supply bottlenecks gradually disappear.
The number of unemployed will initially rise slightly from 2.42 million to 2.55 million and will fall again to 2.45 million next year. This corresponds to unemployment rates of 5.3 in 2023 and 5.5 percent in 2024, up from 5.3 percent last year. At the same time, the number of people in employment will rise from 45.57 million to 45.95 million this year and to 46.07 million in 2024.
New government borrowing will fall from EUR 106 billion in 2022 to EUR 69 billion this year and to EUR 27 billion next year. By contrast, Germany’s current account surplus will rise sharply from EUR 145 billion to EUR 232 billion this year and will even reach EUR 269 billion in 2024. That would amount to 6.3 percent of economic output, more than the EU’s recommended threshold of 6.0 percent.
ifo Konjunkturprognose Sommer 2023: Inflation flaut langsam ab – aber Konjunktur lahmt noch
ifo Institut, München, 2023
ifo Schnelldienst, 2023, 76, Sonderausgabe Juni, 01-53
ifo Economic Forecast Summer 2023: Inflation Slowly Easing – But Economy Still Faltering in Germany
Gross domestic product will decline by 0.4% this year and increase by 1.5% next year.
