Dekabank believes that the global economy will remain resilient despite the key interest rate hikes by key central banks and global crises. “The feared global recession has not materialized so far, and the chances of a soft landing for the economy are high,” said chief economist Ulrich Kater in Dekabank’s economic outlook on Monday in Frankfurt. “In view of a historically strong turnaround in interest rates, the global economy has done extremely well.” The mood is better than at the beginning of the year.
However, the euro zone is stuck in a slight recession, said Kater. Among the major economies in Europe, Germany is in the worst position. The German “business model” is geared more towards industry and thus the world markets than in other countries. The automotive industry is under pressure in view of the transition to electromobility. In addition, there are high energy costs. “Now flexibility is required in order to be able to cope with this structural change without a loss of prosperity,” demands Kater.
Gross domestic product in Germany decreases
DekaBank expects global economic growth of 2.7 percent for 2023 as a whole. For the euro zone, Kater expects a slight increase in gross domestic product (GDP) of 0.6 percent. Only in Germany is there a noticeable minus of 0.6 percent this year.
“Paradoxically, the deeper causes of the resilience of the economy also lie in the corona crisis,” said Kater. “The fiscal stimuli in the pandemic years were so large that they stabilized even further.” The financial cushion would stabilize aggregate demand to this day would come robust labor markets and a stable banking system.
Kater is confident with regard to the further development of inflation this year. The inflation rate in the euro zone could fall below the three percent mark in autumn. In May, the rate was 6.1 percent. However, the economist warns the ECB against cutting interest rates again too quickly. “There is a high risk that inflation will pick up again in 2024 if the economy improves and wages rise significantly,” says Kater. Inflation could therefore stay above the target value of two percent for longer. He now expects another rate hike of 0.25 percentage points. The first interest rate cuts in the common currency area, on the other hand, are only conceivable in the second half of 2024. (dpa)