2023-07-22 15:00:55
The German economy will register a slight contraction of 0.3% in 2023 as a result of the impact of the tensions in the energy market and the tightening of financial conditions, according to the International Monetary Fund (IMF), which anticipates a rebound of 1.3% for next year.
“The energy ‘shock’ and the tightening of financial conditions are expected to keep annual GDP growth slightly negative in 2023,” says the executive board of the international institution in its consultation of the annual report ‘Article IV’ for the German economy.
In this sense, the IMF trusts that the European ‘locomotive’ will gradually regain momentum between 2024-25, as the delayed effects of monetary tightening gradually dissipate and the economy adjusts to the new energy reality.
On the other hand, inflation, which will close this year with an average of 5.8%, is expected to continue moderating in 2024 to 3.3%, although the underlying rate will decline more slowly, with a forecast of 6.2% in 2023 and 3% next year due to increasing wage pressures and the lagged pass-through of the fall in world commodity prices.
In the medium term, projections for the FMI suggest that average GDP growth will fall back below 1% due to accelerating headwinds of population aging, in the absence of significant increases in productivity and/or increased labor supply.
In its consultations, the IMF Executive Board praised the strong policies implemented by the German authorities, which have resulted in remarkable economic resilience, despite the adverse side effects of the war in Ukraine.
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