Germany is likely to narrowly exit recession, posting modest growth in the first quarter of the year, according to an Economy Ministry report released on Friday.
“A technical recession of two consecutive negative quarters appears to have been averted,” the ministry said.
Current forecasts call for a slight year-on-year increase in gross domestic product (GDP) for the full year of 2023, he added. Leading economic institutes expect the German economy to grow by 0.3% this year.
Economic indicators point to a notable recovery in the first quarter, with industrial and construction production driving growth, benefiting from easing bottlenecks, falling energy prices and favorable weather conditions, the report said.
The joint economic projections call for GDP growth of 0.1% in the first quarter. This would follow a 0.4% contraction in the fourth quarter of 2022.
The ministry spoke of a “favorable start to the year”. The mild winter and high levels of gas storage contributed to sufficient gas availability in Germany and Europe, which was reflected in a notable drop in energy prices, the ministry said.
“Consumer confidence is expected to continue its recovery in the coming months, even as inflation-related losses in purchasing power continue to weigh on the economy,” the report said.
Inflation rates should continue to slow down in the coming months, albeit remaining at high levels. The current forecast range is 5.4% to 6.6% for inflation in 2023 and 2.1% to 3.5% for 2024.
The Economy Ministry sees risks to its economic outlook, such as weak private consumption, deteriorating construction conditions, recent problems in financial institutions and geopolitical uncertainty due to the war in Ukraine.
Source: Terra
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