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Germany avoids recession in 2023 – inflation lower than expected

According to the EU Commission, Germany can narrowly avoid a recession in 2023 given that the energy crisis has been mastered so far.

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Germany avoids recession in 2023 – inflation lower than expected

According to the EU Commission, Germany can narrowly avoid a recession in 2023 given that the energy crisis has been mastered so far. The Brussels authorities are expecting a small increase of 0.2 percent in gross domestic product (GDP), after having estimated a minus of 0.6 percent in November. In addition, the euro area is likely to grow more strongly than expected, at 0.9 percent, as can be seen from the winter forecast presented on Monday. In the autumn, the Commission had only predicted a plus of 0.3 percent. The technical recession initially feared for the turn of the year – an economic contraction lasting two quarters – will thus probably be averted.

According to the Brussels authority, surveys indicate that confidence in economic development has increased. Accordingly, the currency area, which grew to 20 members after Croatia's accession, should avoid a contraction of the economy in the first quarter. "The risks of recession and gas shortages have receded and unemployment remains at record lows," said EU Economy Commissioner Paolo Gentiloni.

The risk of a severe recession has recently decreased in Germany as well - mainly because the feared gas shortage situation as a result of a lack of Russian deliveries could be averted. For the year as a whole, the federal government expects growth of 0.2 percent and the International Monetary Fund (IMF) 0.1 percent.

Inflation is unlikely to be as bad in 2023 as initially feared. The EU Commission is expecting an inflation rate (HICP) of 6.3 percent calculated for a European comparison in Germany in 2023; in November it had predicted a value of 7.5 percent. For the euro zone, she now estimates an inflation rate of 5.6 percent after 6.1 percent in the autumn forecast.

With energy prices now falling sharply from last year's highs and supply chain problems easing, the ECB may lower its own inflation forecasts in March, Croatia's central bank governor Boris Vujcic recently told Reuters. In December, the European Central Bank (ECB) had estimated an increase in consumer prices of 6.3 percent for 2023.

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