German government slightly raises 2023 GDP forecast
The German government has raised its economic growth forecast for this year to 0.4% from a previously predicted 0.2%, according to its spring economic projections published on Wednesday and first reported by Reuters last week.
“A gradual recovery is underway, despite a persistently difficult environment,” German Economy Minister Robert Habeck said. He expects stagnation in the first quarter, followed by an acceleration in growth.
With the new projections, the government is slightly more optimistic than the five economic institutes that prepare the Joint Economic Forecasts, which foresee 2023 economic growth of 0.3%.
Current economic indicators such as industrial production, orders received and business climate point to an economic revival in the course of the year, the report said.
“For next year, we expect the recovery to continue and gain in breadth,” Habeck said.
For 2024, the government slightly lowered its growth forecast to 1.6% from the 1.8% foreseen in January.
Inflation forecasts were also adjusted down, with the rate for both 2023 and 2024 now seen 0.1 percentage point lower, at 5.9% and 2.7%, respectively. Inflation stood at 6.9% last year.
Despite government support measures and rising incomes, private consumption will be weak due to inflation-related losses in purchasing power, the report said, forecasting a 0.1% drop in 2023. It will only pick up again later in the year as inflation continues to decline. For 2024, the government sees a 2.1% increase in private consumption.
Given the continuing high demand for labour, employment is expected to continue to grow this year and next, albeit at a somewhat less dynamic pace. The government expects an unemployment rate of 5.4% in 2023 and 5.2% in 2024, following 5.3% in 2022.
Exports are likely to provide impetus but remain at a rather low level by long-term standards. Sentiment among German exporters has rebounded in April to the highest point seen since the outbreak of war in Ukraine last year, according to a survey by the Ifo economic institute released on Tuesday.
The government forecasts export growth of 1.3% in 2023 and 3.3% in 2024.