Germany’s recession will be milder than expected in 2023

December 28, 2022

0 1 minute read

Table of Contents

Germany’s recession will be milder than expected in 2023

According to the Ifo economic agency, Germany’s recession will be milder than expected in 2023 with the GDP contracting by 0.1% in 2023, down from a prior projection of 0.3%. IFO is the first major economic institute to provide a more optimistic forecast for Europe’s largest economy.

The economy is estimated to increase by 1.8% in 2022, up from the 1.6% previously predicted. Rising energy prices as a result of Russia’s assault on Ukraine have resulted in sky-high inflation. It has harmed German households and export-dependent sectors. However, when government steps to reduce energy prices take effect, inflation is predicted to fall from 7.8% in 2022 to 6.4% in 2023, and 2.8% in 2024.

Demand for goods in the manufacturing sector is robust, with order books so full that output has “risen modestly until very recently,” according to Ifo. Ifo forecaster Timo Wollermershaeuser observed that Germany’s output already grew at a faster-than-expected 0.4 percent in the third quarter. While the next two quarters are anticipated to see contractions, “things will start to pick up again,” he predicts. In 2024, economic growth is predicted to return to 1.6%.

The ZEW institute’s economic expectations index increased 13.4 points from November to December, marking the third straight uptick following months of fall.

The German government has announced a 200-billion-euros aid plan to help ease the effects of the energy crisis. It include a ceiling on gas prices for companies and consumers.