What awaits the German economy in 2023?

In the first quarter of the year, German GDP grew by 0.1% after shrinking by 0.4% in the fourth quarter of last year. Timo Wolmersheiser, head of the forecasting department at the Ifo Institute, noted that the economic consequences of the recession observed last winter turned out to be less severe than expected.

And this was mainly due to a less significant weakening of purchasing power as a result of a significant drop in energy prices.

According to the institute's forecast, this year the German economy will grow by 0.3%, and not shrink by 0.4%, as Ifo analysts believed in the fall. Experts expect that high inflation is unlikely to slow down soon, since demand is still high. 

Experts also predict that inflation will slow down from 6.9% last year to 6.0% this year and to 2.4% in 2024 due to lower energy prices.

The European Central Bank is likely to continue raising interest rates, despite the problems of the banking sector. However, if the instability in this area increases, this will be followed by a reduction in the supply of loans, which may force the ECB to stop tightening financing conditions. As a result, inflation will remain elevated for a longer period of time.