By BZ/afp
The five leading economic research institutes in Germany expect German economic output to decline by 0.6 percent this year.
“Germany has been in a downturn for over a year,” the institutes explained in their so-called joint diagnosis on Thursday. In the spring they were still expecting slight growth of 0.3 percent for this year.
The reason for the now forecast shrinking gross domestic product (GDP) is that “industry and private consumption are recovering more slowly than we expected in the spring,” explained Oliver Holtemöller, deputy president of the Leibniz Institute for Economic Research Halle (IWH). The mood in companies has recently deteriorated again due to political uncertainty. In addition, production “fell noticeably again”.
“However, wages have now risen due to inflation, energy prices have fallen and exporters have partly passed on the higher costs,” explained the institutes. They therefore expect the downturn to end by the end of the year. For the coming year, the researchers expect the economy to grow moderately by 1.3 percent – 0.2 percentage points less than they forecast in the spring.
Although the economic weakness has now reached the labor market, the institutes only expect a “moderate increase” in unemployment to 2.6 million people in 2023, which would correspond to a rate of 5.6 percent. The number of unemployed will probably fall slightly in 2024.
“The situation on the price front is gradually easing,” the institutes explained. This year the inflation rate is expected to be a high 6.1 percent, but will fall to 2.6 percent over the next year. The researchers have already forecast a rate of 1.9 percent for 2025; the European Central Bank’s target is two percent.
The RWI in Essen, the Ifo Institute in Munich, the IfW in Kiel, the IWH in Halle and the DIW in Berlin are involved in the spring joint diagnosis.