2023-08-29 02:19:59
High interest rates, expensive energy and weak exports are paralyzing the German economy. The German Economic Institute (IW) is therefore expecting real gross domestic product (GDP) to fall by up to 0.5 percent this year, according to the economic report that has now been published.
Due to its high focus on world markets and its high export quota, the German economy is suffering disproportionately from geoeconomic shocks such as the Ukraine war and the tensions in relations with China, the scientists emphasized. With its high proportion of industry in an international comparison and the importance of energy-intensive industries, it is also feeling the effects of the existing supply risks and cost shocks more than other countries. At the same time, domestic demand is suffering from high inflation. Private consumption will slow down the economy.
The IW experts predicted that economic output at the end of 2023 would only be at the level of the end of 2019. For the 3rd and 4th quarters of 2023, they expect a decline in economic output.
Jannik Müller Published/Updated: , Recommendations: 4 Stephan Finsterbusch, Heilbronn Published/Updated: , Recommendations: 3 Alexander Armbruster Published/Updated: , Recommendations: 9
More unemployed expected
The economic slowdown is also having an impact on the labor market. On average for 2023, the employer-oriented institute expects 2.58 million unemployed, 160,000 more than in the previous year. The unemployment rate will rise to a good 5.5 percent. Although no major redundancies are to be feared, the unemployed are having increasing difficulties finding new employment. According to the experts, the inflation rate in 2023 will be only slightly below the previous year’s level at 6.5 percent. “However, the significant wage increases, allowances and transfers counteract the loss of purchasing power to a large extent,” emphasized the institute. As a result, real consumer spending should only be around 1.25 percent below the previous year’s figure.
According to the forecast, two contrasting developments are making themselves felt in public finances: Due to the significantly dampened economic outlook, tax revenues are likely to be lower than previously forecast, while the state can expect lower costs for the electricity and gas price brakes on the expenditure side. The state deficit is likely to amount to 97 billion euros this year, or just under 2.5 percent of economic power. The debt ratio, in turn, will stabilize at 65 percent of GDP. “In view of the economic circumstances, the current national debt can be seen as manageable,” concluded the IW.
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