German economy set for long recession, top think tank warns
The German economy faces a long recession as continued inflation takes its toll, the top think tank warns
The German economy will contract more than expected this year as continued inflation takes its toll, a leading economic think tank has warned.
Germany has been labeled the ‘problem child’ of the Eurozone economy as investor confidence fades.
Gross domestic product is expected to fall by 0.4 percent this year, more than the 0.1 percent projected by the Ifo Institute in March.
The Ifo Institute’s head of economic forecasting, Timo Wollmershaeuser, said: “The German economy is very slowly emerging from recession.”
Recession: Germany labeled the ‘problem child’ of the Eurozone economy as investor confidence fades
The economic institute has also cut its forecasts for Germany in 2024 to 1.5 percent GDP growth, down from the 1.7 percent it had expected.
Data from the Federal Bureau of Statistics last month showed that Europe’s largest economy contracted by 0.3 percent in the first quarter of 2023, compared to the previous three months, when it contracted by 0.5 percent.
The technical definition of a recession is two consecutive quarters of contraction.
The Bureau of Statistics said that while private sector investment and construction grew at the start of the year, this was partially offset by a drop in consumer spending as higher prices forced households to rein in spending.
The war in Ukraine has unsettled businesses and consumers alike.
The most pressing problem for Germany is getting the energy transition on track.
Affordable power is an essential prerequisite for industrial competitiveness, and even before the end of Russia’s gas supply, Germany had one of the highest electricity costs in Europe.