All about inflation and recession in Germany
2022.12.16 03:49
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All about inflation and recession in Germany
Budrigannews.com – In its biannual update of its economic forecasts, the Bundesbank said on Friday that inflation in Germany, the largest economy in the euro zone, is likely to be higher than previously thought and that economic growth will be weaker as a result of the certainty of a recession next year.
The European Central Bank made similar revisions on Thursday, predicting that inflation in the 19-country euro zone will rise above its 2% target through 2025 and that the winter months will see a shallow recession.
Inflation in Germany is now anticipated to be 7.2% in 2023, significantly higher than the June projection of 4.5 percent. In 2024, the figure was raised to 4.1% from 2.6%. 2.8% was the initial estimate for 2025.
According to the Bundesbank, “the risks to economic growth are primarily tilted to the downside, primarily due to potential shortages in the supply of energy.” Upside risks dominate when it comes to inflation.”
The growth projections also confirm that Germany will likely be one of the currency bloc’s worst performers next year due, in part, to its excessive reliance on Russia.
More ECB still has to fight inflation-Villeroy
In 2023, the economy is seen shrinking by 0.5%, a major change contrasted with assumptions for a 2.4% extension found in June. The growth forecast for 2024 has been reduced from 1.8% to 1.7%, and growth is expected to be 1.4% in 2025.
The energy crisis will increase inflation, reduce real disposable incomes, and hinder household consumption until at least mid-2023, according to the Bundesbank, even though gas shortages are unlikely. Production will also be affected by high energy costs, particularly in energy-intensive industries.
The Bundesbank stated, “The German economy will gradually recover from the second half of 2023 onwards.” This is because foreign demand is anticipated to rise, uncertainty will lessen, energy commodity price pressures will lessen, and inflation will decrease.”
