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German economy predicted to enter recession this winter

BERLIN. KAZINFORM – Due to rising energy prices and inflation, the German economy may face a recession this winter, analysts of the Federal Association of German Banks believe, Kazinform reports referring to Deutsche Welle.

The German economy is in danger of “slipping into recession” this winter due to the situation around Ukraine, which has led to higher energy prices, as well as due to the continued rise in inflation. This is stated in the forecast of the Federal Association of German Banks (BDB), published on Thursday, September 22.

Germany’s gross domestic product (GDP) will grow by 1.4 percent in 2022, according to BDB analysts, but will shrink by 1.3 percent in 2023. “The sharp rise in energy prices has led to a huge increase in the costs of companies. High inflation also results in a significant loss of purchasing power among consumers,” explained BDB Deputy CEO Henrietta Peuker. The long-term effects of the pandemic and the disruption of supply chains continue to have a negative impact on the economy, she said.

The decline in German GDP will continue until the summer of 2023, analysts of the association expect. A possible recovery in economic growth will be “critically” dependent on inflation, the BDB said in a forecast. Prices will rise 8 percent in 2022 and 6.2 percent next year, analysts predict.

“By raising rates in July and September, the European Central Bank has convincingly demonstrated that fighting inflation is its top priority. However, the 6 percent price increase projected for 2023 will also be well above the inflation target,” the analysts said.

Household consumer spending in 2022 will increase by 3.3 percent, and in 2023 will decrease by 1.2 percent, experts expect.

Earlier, analysts at the German Institute for the World Economy (IfW) in Kiel also predicted that in 2023, German GDP could decline by 0.7 percent.

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