German government expects recession and high inflation in 2023

The Local (news@thelocal.com)
The Local ([email protected]) • 12 Oct, 2022 Updated Wed 12 Oct 2022 11:11 CEST
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German Economics Minister Robert Habeck (Greens) is expected to announce a bleak 2023 economic forecast. Photo: picture alliance/dpa | Kay Nietfeld

Germany’s Economic Affairs Ministry is set to announce a bleak forecast for next year.

Robert Habeck, the country’s Green Economic Affairs and Climate Action Minister, is scheduled to give fuller numbers Wednesday afternoon - but Germany’s economy looks set to slow next year, even as prices keep climbing.

After a slight growth rate of 1.4 percent this year, the German government reportedly expects Europe’s largest economy to shrink by 0.4 percent in early 2023 as the war in Ukraine continues to have knock-on economic effects.

The forecast represents a significant recalculation in how the government thinks the economy is going to do. In April, Habeck still expected the German economy to grow by between 2 and 2.5 percent both this year and next.

The government also expects inflation to remain close to its current level in 2023, with consumer prices rising by seven percent. That’s only slightly less than the eight percent Germany has been recording for most of this year. Before 2022, the country had not seen inflation rates like that since the 1970s.

It’s not the first time the federal government has slashed its forecast this year either, fueling some fears the problem could end up being worse than predicted.

READ ALSO: When will Germany’s rising cost of living slow down?

Jens Südekum, Professor of International Economics at Heinrich Heine University in Düsseldorf has already warned of a ‘severe’ recession, with energy-intensive businesses particularly exposed.

He says Germany is likely to see a wave of bankruptcies if the government doesn’t step in to provide additional support.

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