The leading economic research institutes expect GDP to expand by 1.4 percent in the current year and contract by 0.4 percent in 2023. In 2024, GDP will expand at an annual average rate of 1.9 percent.
Gross domestic product will still increase by 1.6 percent this year and then contract by 0.3 percent next year. Inflation will average 8.1 percent this year and rise to 9.3 percent next year. It is expected to peak in the first quarter of 2023 at around 11 percent. In 2024, economic output is expected to increase by 1.8 percent and the inflation rate to fall to 2.4 percent.
A bleak mood hangs over the German economy. The ifo Business Climate Index fell in August to 88.5 points, down from 88.7 points (seasonally adjusted) in July. Companies were somewhat less satisfied with their current business, and the strong pessimism of their outlook for the coming months is virtually unchanged. Uncertainty among the companies remains high, and the German economy as a whole is expected to shrink in the third quarter.
What are economists’ expectations regarding future price developments? This round of the Economic Expert Survey (EES), conducted by the ifo Institute and the Swiss Economic Policy Institute, examines the inflation expectations of economists worldwide. The result: high price increases are expected worldwide in the coming years.
In the second quarter, the Randstad-ifo Personnel Manager Survey looked at the impact of current events surrounding the war in Ukraine on HR policy and how companies are dealing with this situation. What measures are companies taking to counteract rising (energy) costs as well as inflation and thus create relief for the company itself, but also and above all for employees? Another focus was on wage-specific aspects: Have wages already been increased, and what about bonus payments? A further point is the integration of refugees from Ukraine into the labor market.
The outlook for the global economy has deteriorated significantly since December 2021. Nevertheless, the economy in eastern Germany and Saxony is likely to continue expanding. In the current year, economic output in those regions will grow by 2.9 and 1.8 percent respectively (Germany: 2.5 percent). Assuming that it is still possible to avoid an undersupply of natural gas this coming winter, economic output in eastern Germany is likely to be 3.5 percent higher year over year in 2023; in Saxony, gross domestic product will increase by 3.3 percent (Germany: 3.7 percent).
Since the beginning of the year, the German economy has been recovering from earlier waves of the coronavirus. The associated normalization of spending in the consumer-related service sectors is giving the economy a strong boost. However, high inflation, the war in Ukraine, and continuing supply bottlenecks are slowing the economic recovery in almost all sectors of the economy. GDP will grow by 2.5 percent in 2022 and 3.7 percent in 2023. This year the inflation rate is expected to reach 6.8 percent, its highest level since 1974. Consumer prices are also expected to rise at an above-average rate of 3.3 percent next year.
Sentiment in the German economy has brightened. The ifo Business Climate Index rose to 93.0 points in May, after 91.9 points in April. The companies were above all much more satisfied with their current business. In contrast, expectations barely changed, with companies remaining skeptical. The German economy has proven itself resilient in the face of inflation concerns, material bottlenecks, and the war in Ukraine. There are currently no observable signs of a recession.
The leading economic research institutes expect gross domestic product to increase by 2.7 percent in the current year and by 3.1 percent in 2023.
To take account of the imponderables regarding the further course of the Russian-Ukrainian war, two scenarios were considered for the forecast. The base scenario assumes only a temporary increase in raw material prices, supply bottlenecks, and uncertainty. In the alternative scenario, the situation initially worsens before gradually easing from mid-year. Under these assumptions, GDP is expected to grow by only 3.1 percent (base scenario) and 2.2 percent (alternative scenario) this year, noticeably less than previously expected (3.7 percent). In the coming year, growth is then expected to be 3.3 percent (base scenario) and 3.9 percent (alternative scenario).
The inflation rates in Germany and the euro area, which are currently well above the inflation target set by the European Central Bank (ECB), are dominating the current monetary policy debate. There are increasing signs that the higher inflation will last longer than originally expected by most economists and members of the central banks.
The leading economic research institutes expect gross domestic product to increase by 2.4 percent in the current year and by 4.8 percent in 2022.
Economic activity dropped less than expected in Q4 2020, yet the recovery will start only later this year.
After a sharp recovery in Q3, economic activity will decrease again in Q4 due to new lockdowns.