The Bundesbank provides an insight into the long-term prospects for the German economy. Despite the current challenges, there is optimism.
The Bundesbank has significantly reduced its growth forecast for the coming year in Germany, but is also somewhat less pessimistic for the current year.
For 2023, it expects economic output (GDP) to shrink by 0.1 percent, as the Bundesbank announced in Frankfurt. In the previous forecast from June, a minus of 0.3 percent was expected. At the same time, the growth expectation for 2024 was reduced from 1.2 to 0.4 percent.
“The German economy will recover in the coming years,” said the Bundesbank. In the medium term, it expects slightly stronger growth of 1.2 percent in 2025 and 1.3 percent in 2026. However, the economic recovery will be delayed somewhat, it is said with regard to the short-term prospects.
German economy will soon be back on the expansion path
Currently, weak foreign demand is the main brake. In addition, private consumption is showing hesitation and higher financing costs are dampening investments. But the picture will soon brighten: “From the beginning of 2024, the German economy is likely to return to an expansion path and gradually pick up speed,” said Bundesbank President Joachim Nagel.
There is also an improvement in inflation: the inflation rate will be more than halved in 2024 compared to this year. “Inflation in Germany is on the decline, but it is still too early to give the all-clear,” said Bundesbank chief Nagel. Specifically, the Bundesbank expects an inflation rate according to the European method (HICP) of 6.1 percent this year and 2.7 percent next year. In the June forecast, the rates were 6.0 and 3.1 percent.
Source: Stern
