Germany's economic recovery is coming – but it won't be fast
The German economy is expected to gradually recover over the next few years, but the recovery will be relatively slow compared to other industrialised nations, according to the German Institute for Economic Research (DIW).
The DIW expects German Gross Domestic Product (GDP) to shrink by 0.4 percent this year.
But an uptick is on the way, and the DIW anticipates growth of 1.2 percent for each of the next two years. The institute also expects inflation to decrease over the course of the next year, reaching around two percent.
"While this may seem like a disappointing development to many, the numbers must be viewed with realistic expectations," said DIW President Marcel Fratzscher.
"Just twelve months ago, most forecasts predicted a deep recession for Germany, especially in the event of an energy shortage. The measures taken by the federal government and the assurance of energy security prevented this scenario."
The global economy is experiencing significantly more dynamism than the German economy, according to the DIW. The experts expect global growth of 3.9 percent for both this year and the next.
Fratzscher identified private consumption as a drag on the economy, with a recovery expected to develop slowly over the coming months due to high inflation, despite recent wage increases.
He also said the German government's fiscal policy "does not make a positive contribution to economic dynamism."
READ ALSO: Germany plans return to debt-limit rules in 2023
Germany returned to the constitutionally enshrined "debt brake" in 2023, which limits annual new borrowing to 0.35 percent of gross domestic product.
The DIW is calling on the government to reconsider the move. Fratzscher said adhering to the debt brake in the coming year was not justifiable in times of crisis and prevented important investments in the future.
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The DIW expects German Gross Domestic Product (GDP) to shrink by 0.4 percent this year.
But an uptick is on the way, and the DIW anticipates growth of 1.2 percent for each of the next two years. The institute also expects inflation to decrease over the course of the next year, reaching around two percent.
"While this may seem like a disappointing development to many, the numbers must be viewed with realistic expectations," said DIW President Marcel Fratzscher.
"Just twelve months ago, most forecasts predicted a deep recession for Germany, especially in the event of an energy shortage. The measures taken by the federal government and the assurance of energy security prevented this scenario."
The global economy is experiencing significantly more dynamism than the German economy, according to the DIW. The experts expect global growth of 3.9 percent for both this year and the next.
Fratzscher identified private consumption as a drag on the economy, with a recovery expected to develop slowly over the coming months due to high inflation, despite recent wage increases.
He also said the German government's fiscal policy "does not make a positive contribution to economic dynamism."
READ ALSO: Germany plans return to debt-limit rules in 2023
Germany returned to the constitutionally enshrined "debt brake" in 2023, which limits annual new borrowing to 0.35 percent of gross domestic product.
The DIW is calling on the government to reconsider the move. Fratzscher said adhering to the debt brake in the coming year was not justifiable in times of crisis and prevented important investments in the future.
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