The Ifo Institute for Economic Research said that German GDP probably declined slightly in 2023 amid persistently high inflation, but next year there may be a recovery.
According to Ifo forecasts, Europe's largest economy will shrink by 0.2% in the first three months of 2023, following a 0.4% drop in the 4th quarter. Thus, the economy will be in recession. Official GDP data for the 1st quarter of 2023 will be published on April 28.
As for the whole of 2023, Ifo economists expect Germany's GDP to fall by 0.1%. According to the latest forecasts of the German government, the economy will grow by 0.2% in 2023.
Meanwhile, the Ifo expects GDP growth to accelerate to 1.7% next year.
"Consumption-related industries are expected to suffer from high inflation, but manufacturing activity will support economic growth in 2023," the Ifo said, adding that starting mid-year at the latest, rising real wages will support the economy.
As for the inflation outlook, the Ifo expects consumer inflation in Germany to rise by 6.2% this year and weaken to 2.2% next year amid falling energy prices and the easing of supply problems in manufacturing.