The leading institutes no longer expect a recession in Germany due to falling energy prices. The gross domestic product is expected to grow by 0.3 percent this year, according to the joint economic forecast for the federal government published on Wednesday. In autumn, under the impression of the energy crisis, a minus of 0.4 percent was estimated and a recession was expected in the just ended winter half-year, which is now not happening.
"The economic setback in the winter half of 2022/2023 is likely to have been lighter than feared in the autumn," said the economic chief of the Ifo Institute, Timo Wolmershäuser. "The decisive factor is a lower loss of purchasing power as a result of significantly declining energy prices." For 2024, growth of 1.5 percent is now expected, also due to declining inflation, after 1.9 percent so far.
Inflation rate to fall significantly
With regard to inflation, the institutes do not expect a noticeable easing until next year. Then the inflation rate is expected to fall to 2.4 percent, after 6.0 percent this year. For comparison: in 2022, it was still 6.9 percent. The institutes see industry as a pillar of the economy, which is likely to benefit from easing supply bottlenecks and cheaper energy. The construction industry, on the other hand, will slow down. "Demand will remain weak, especially in residential construction, also because the European Central Bank will continue to tighten its monetary policy stance and thus financing costs will continue to rise," the statement said.
The institutes have good news for the labour market. The number of people in employment is likely to increase further, from around 45.6 million last year to around 46.0 million next year. However, the number of unemployed is likely to increase temporarily from 2.42 to 2.48 million this year, "as Ukrainian refugees do not immediately gain a foothold in the labour market". In 2024, unemployment is expected to fall again to 2.41 million.
The Joint Economic Forecast serves the Federal Government as the basis for its projections, which in turn form the basis for the tax estimate. In its annual economic report published in January, the German government expects growth of 0.2 percent for the current year. In the spring, Federal Minister of Economics Robert Habeck wants to present an updated forecast.
The spring forecast was prepared by RWI in Essen, the Ifo Institute in Munich, the IfW in Kiel and the IWH in Halle. Cooperation partners are the Austrian Institute for Economic Research (WIFO) and the Institute for Advanced Studies Vienna. The Berlin DIW is pausing due to the restructuring of its in-house economic research, but wants to be there again in the fall.