The Ifo Institute forecasts that the German recession will be sharper this year than previously anticipated due to the impact of persistent inflation on private consumption.
Timo Wollmershaeuser, the head of economic forecasts at Ifo, stated that the German economy is slowly emerging from the recession. The Ifo Institute had initially forecasted a 0.1% decline in German gross domestic product for this year in March, but now expects a larger contraction of 0.4%.
“When we compare Germany with our main trading partners, these countries are at least expected to post growth,” Wollmershaeuser said. Ifo forecasts eurozone GDP will expand by 0.6% this year and the U.S. by 0.9%.
The economic institute has also cut the forecasts for Germany in 2024 to 1.5% GDP growth, down from the 1.7% it previously expected.
The forecast indicates a slow easing of inflation from 6.9% in 2022 to 5.8% this year, followed by a further decline to 2.1% in 2024. Regarding core inflation, the Ifo Institute forecasts it will increase to 6% this year from 4.9% in the previous year, before falling to 3% in 2024 . Experts project a 2.2% increase in 2024, suggesting that there is no anticipation of further rise until that year.
New government borrowing will fall from 106 billion euros ($115 billion) in 2022 to 69 billion this year and 27 billion next year, according to Ifo’s estimates.
($1 = 0.9162 euros)