ACCORDING TO THE IFO ECONOMIC RESEARCH INSTITUTE, THE PROSPECTS OF THE GERMAN ECONOMY WERE SIGNIFICANTLY WORSE.
The growth prospects of the German economy have deteriorated significantly, according to the analysis published on Monday by the Ifo economic research institute in Munich.
In its latest quarterly forecast, the Institute of the University of Munich (ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München e.V.) lowered its growth forecast for this year and next year, while raising its inflation expectations for the same period. The GDP may expand by 1.6 percent in 2022, compared to the previously expected 2.5 percent, while in 2023, ifo expects Europe’s largest economy to shrink by 0.3 percent. In the June report, ifo still calculated GDP growth of 3.7 percent. Last year, the German economy expanded by 2.6 percent. In a quarterly comparison, according to ifo, after stagnating in the third quarter of 2022, the German economy will shrink by 0.2 percent in the fourth quarter and by 0.4 percent in the first quarter of next year, which was justified by increased energy costs and runaway inflation.
“Gas deliveries from Russia and drastic price increases have undermined the post-coronavirus economic recovery” – as evaluated by the ifo institute’s forecasting director, Timo Wollmershaeuser, who called it unusual that the growth prospects had deteriorated to such an extent compared to the previous report three months earlier. The purchase value of wages may fall by three percent this year and next, which has not been seen since the beginning of data communication in 1970, he added. Ifo raised this year’s inflation outlook from 6.8 percent to 8.1 percent, and next year’s from 3.3 percent to 9.3 percent. In 2021, the average annual growth rate of consumer prices was 3.1 percent. Inflation may peak around 11 percent in the first quarter of 2023 due to high energy prices. According to ifo analysts, the German economy may return to normal in 2024: after next year’s recession, GDP may rise by 1.8 percent, while inflation may slow down to 2.5 percent, the report states.
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