German economy to grow 0.3 pct in 2023: leading institutes

Germany’s economy is recovering faster than previously expected, with gross domestic product (GDP) set to grow by 0.3 percent in 2023, according to a joint forecast published by the country’s leading economic institutes on Wednesday.

Supply-side disruptions that had weighed on Europe’s largest economy were easing, according to the RWI –Leibniz Institute for Economic Research, the Halle Institute for Economic Research (IWH), the Kiel Institute for the World Economy and the ifo Institute.

Germany’s manufacturing sector is expected to support economic activity in the coming quarters, “benefiting directly from the easing of supply bottlenecks and cheaper energy,” the institutes said. Back in the autumn of 2022, the institutes had still predicted a mild recession of 0.4 percent.

“As real wages pick up again, private consumption will also contribute to the overall economic expansion in the further course,” the institutes said. Germany’s construction sector, on the other hand, is expected to slow the economy.

Demand for residential construction is to remain particularly weak, according to the joint forecast. This is partly due to the high financing costs which are to rise even further as the European Central Bank continues to tighten its monetary policy to fight inflation.

Although the peak has been reached, a “noticeable decline in consumer price inflation will still be some time coming, as the demand pull is likely to continue for the time being.” The institutes expect annual inflation in Germany to fall to 6 percent in 2023. ■

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