German industry association BDI cuts 2023 economic forecast
The German industry association BDI on Wednesday cut its 2023 forecast for the German economy to a 0.4% contraction, after previously predicting gross domestic product would stagnate.
Following a winter recession in the last quarter of 2022 and the first quarter of 2023, “economic recovery is still a long way off,” the BDI said in its quarterly report.
“The growth impulses from foreign trade have become significantly weaker,” it said, adding that it expects price-adjusted exports to decline by 0.5% this year, as exports to China and the U.S. fall.
Private consumption is also putting the brakes on growth. Real wages have fallen for three years due to high inflation, and recovery is advancing only slowly.
“Consumers continue to hold back,” the report said, forecasting a 0.5% contraction in household consumption.
Industrial production is currently supported by high order backlogs in the capital goods sector, but these are slowly being worked off. The lack of orders is increasingly becoming the number one obstacle to production, according to the BDI report.
The BDI is the latest institution to cut its forecasts for the economy: German economic institutes such as Ifo and DIW also expect a 0.4% contraction.
Earlier this week, the European Commission also cut its forecast for the German economy to a 0.4% contraction this year, compared with the 0.2% growth projected previously.
Source: Reuters (Reporting by Maria Martinez,Editing by Miranda Murray)