The overall economic development in Germany has changed compared to autumn 2022 slightly improved, but the situation remains tense. This is the conclusion reached by the economists who published their updated economic forecast for the current and the coming year this Wednesday. They are expecting one this year Gross domestic product (GDP) growth of 0.2 percent, for 2024 they expect growth of 1.3 percent. In November they had forecast a slight decline. The high inflation continues to be a major burden for the economy, the experts write in their report, in which they discuss their view of the economic situation.
Monika Schnitzer, Chairwoman of the Advisory Council, said: “The inflation-related loss of purchasing power, the poorer financing conditions and the only slowly recovering foreign demand are preventing a stronger upswing this year and next.”
The inflation has passed its high point in autumn 2022, according to economic experts. However, it is still significantly higher and is only likely to decrease slowly. On average for the year, the experts expect one in 2023 inflation rate of 6.6 percent. “Inflation is increasingly affecting the economy,” said Martin Werding, a member of the German Advisory Council. “The increased producer prices and the expected wage increases should keep consumer price inflation high into the coming year.” Only in 2024 is the rate of inflation likely to drop noticeably to 3.0 percent.
The development at labour market describe the economists as stable despite the tense economic situation. According to their estimates, employment should increase slightly by the end of 2024. Due to the recently higher wage settlements and additional inflation compensation premiums in 2023 and 2024, the council expects a significant increase in real wages of 5.9 and 4.5 percent respectively.
“At least for 2023, wage growth is lower than expected inflation. One Real wages will not increase until 2024. This is expected to stimulate private consumption,” said Achim Truger, a member of the Advisory Council.
Economists do not see financial market stability at risk
Against the background of the recent turbulence in the banking sector, the Council does not consider the stability of the financial markets to be at risk. The situation is very different from that of the 2008 financial crisis, said Ulrike Malmendier from the German Advisory Council. The interbank market works well and the supply of credit to the real economy is secured.
Although be the Uncertainty in the financial markets recently increased due to the closure of the Silicon Valley Bank and the takeover of Credit Suisse by UBS, according to Malmendier. Unlike in the global financial crisis of 2008, however, the difficulties of individual banks were not based on largely worthless financial products.