German economic institutions lower GDP forecast for 2023

German economic institutions lower GDP forecast for 2023

A German flag is reflected in the window of the Paul Loebe Building in Berlin, Germany, Nov. 19, 2020. REUTERS/Hannibal Hanschke/File Photo

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BERLIN, Sept. 8 (Reuters) – Two of Germany’s leading economic institutions have lowered their forecasts for Europe’s largest economy next year as they predicted high energy prices resulting from the war in Ukraine would take their toll.

The IfW institute in Kiel predicted on Thursday that the economy would contract by 0.7% in 2023, a reversal from the June forecast that forecast growth of 3.3%.

The RWI Institute in Essen lowered its forecast for 2023, but still forecast growth of 0.8% instead of the previous 2.7%.

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For the current year, IfW and RWI still expect the German economy to grow, but not as strongly as previously thought, lowering their forecasts to 1.4% and 1.1% respectively.

IfW and RWI, part of a government advisory group, have also raised inflation forecasts for this year, citing the rise in energy prices.

The IfW said inflation would reach 8.0% this year and 8.7% next year, while the RWI forecast 2022 inflation at 7.3% and 2023 inflation at 3.5%.

Recent increases in electricity and gas prices will noticeably reduce the purchasing power of private households and lead to a decline in private consumer spending.

The German government on Sunday unveiled plans to spend 65 billion euros ($65 billion) to protect consumers and businesses from the effects of rising inflation. The latest package brings to 95 billion euros the amount allocated to fight inflation since the start of the war in Ukraine. read more

($1 = 0.9999 euros)

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