BERLIN, Sept 7 (Reuters) – The German economy will contract by 0.4% this year, the Ifo Institute said on Thursday, confirming its earlier forecasts from June.
“Contrary to earlier expectations, the recovery is unlikely to occur in the second half of the year,” said Ifo forecaster Timo Wollmershäuser.
However, Ifo is maintaining its forecasts for 2023 as Germany’s statistical office revised its economic estimate for the first quarter of the year to a 0.1% contraction in GDP, compared to the previous estimate of a 0.3% contraction. , said Wollmershauser.
“Without this revision, we would have lowered the economic growth forecast for this year by 0.3 percentage points to -0.7%,” he said.
For 2024, the economic institute expects growth of 1.4%, 0.1 percentage points less than previously forecast. In 2025, growth will be 1.2%.
The bright spot is private consumption, which should gradually recover in the second half of the year.
“The increase in disposable household income will continue to be strong,” said Wollmershäuser. As inflation rates slowly fall, there will be an increase in purchasing power, he added.
Inflation is expected to slowly decline from 6.9% in 2022 to 6.0% this year, then to 2.6% in 2024 and 1.9% in 2025.
The number of unemployed will initially remain high at 2.59 million people this year and 2.58 million next year. According to the Ifo forecast, unemployment is likely to fall to 2.43 million people in 2025.
The current account balance will increase to 7.1% of GDP in 2025, after temporarily falling to 4.2% in 2022 due to a surge in import prices.