BERLIN, April 14 (Reuters) – Germany is expected to narrowly emerge from recession and post modest growth in the first quarter of the year, according to a report by the Economics Ministry released on Friday.
“A technical recession with two negative quarters in a row appears to have been averted,” the ministry said.
Current forecasts assume a slight increase in gross domestic product (GDP) for 2023 as a whole compared to the previous year. Leading economic institutes assume that the German economy will grow by 0.3% this year.
Economic indicators are pointing to a noticeable recovery in the first quarter, with industrial and construction production driving growth, benefiting from an easing in material shortages, falling energy prices and benign weather conditions, the report said.
The institute’s joint forecast assumes GDP growth of 0.1% in the first quarter. This follows a 0.4% decline in the fourth quarter of 2022.
The ministry spoke of a “favorable start to the year”. The mild winter and high gas reserves have contributed to sufficient gas availability in Germany and Europe, which has been reflected in a noticeable drop in energy prices, according to the ministry.
“Consumer sentiment is expected to continue to recover in the coming months, although inflation-related purchasing power losses continue to weigh on the economy,” the report said.
Inflation rates are likely to weaken further in the coming months, albeit at a high level. The current forecast range is 5.4% to 6.6% for inflation in 2023 and 2.1% to 3.5% for 2024.
The Ministry of Economy sees risks to its economic outlook, such as weak private consumption, worsening construction conditions, recent problems at financial institutions and geopolitical uncertainties due to the war in Ukraine.
Reporting by Maria Martinez Editing by Miranda Murray
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