With high inflation, rocketing energy costs, and a recession on the horizon, the outlook for the German economy is gloomy at the moment.
According to a study by the Institute for Economic Research (Ifo) freelancers and businesses with less than nine employees are feeling particularly pessimistic about the future in the current climate.
In a monthly study, in which freelancers and small business owners are asked to assess both their current business situation and evaluate their business expectations, the index fell to a record low of minus 12.8 points in August.
Though business expectations rose slightly in July, they still remain very low, with most of those questioned predicting significantly reduced income in the coming months. Those in the retail sector, in particular, are reporting difficult months.
The Ifo’s head of surveys, Klaus Wohlrabe said he doesn’t expect the results of the survey to improve any time soon. “The worry lines among entrepreneurs are deep with a view to the coming months,” he said.
High inflation is leading to a loss of purchasing power, which Wohlrabe says means that “even the smallest businesses and solo self-employed cannot escape the general uncertainty”.
The mood throughout the German economy is gloomy in general at the moment, and the Ifo has drastically revised its economic forecasts for the coming year.
Gross domestic product is now expected to decline by 0.3 percent in 2023 instead of growth of 3.7 percent, as Germans are expected to consume less as their purchasing power declines.
“The cuts in gas supplies from Russia in the summer and the drastic price increases triggered by them are spoiling the economic recovery after Corona,” the Ifo’s head of economic research Timo Wollmershäuser said.