The European Commission, which had previously forecast a contraction of 0.6%, indicated on Monday that the German economy will grow a little this year.
The European Commission projects GDP growth of 0.2% by 2023 for Europe’s largest economy, which is higher than it had forecast in the fall due to lower energy prices and political support for individuals. and companies.
Despite a recent boost in confidence, the economy is still forecast to experience a modest downturn in early 2023 as home heating costs continue to rise and as government assistance for January and February will only be paid in March, according to the Commission.
In 2024, growth is expected to rise to 1.3%, according to Commission projections. Rising energy prices and rising input costs caused the German Consumer Price Index, which is harmonized compared to other European Union nations, to peak in October at 11.6%. Consumer costs have fallen somewhat since then.
Gas and electricity price constraints are anticipated to lessen the impact of high growth in wholesale energy prices in 2023. However, the Commission predicted that steadily rising producer prices would keep inflation high, with a forecast 6.3% in 2023. German inflation is expected to fall to 2.4% in 2024.
The EU executive updates the growth projection for 2023 of the euro zone
According to the European Commission, this year’s economic growth in the euro zone is likely to be higher than originally anticipated, and inflation will be lower than expected by the end of 2022.
The 20 nations that use the euro are expected to see economic growth this year of 0.9%, up from 0.3% anticipated in November, according to the EU’s executive arm.
Given that growth in the last three months of 2022 was 0.1% q/q and that the Commission forecasts a figure of 0.0% in the first three months of 2023, the single currency area will narrowly avoid technical recession that he had predicted three months ago
According to the Commission, there is a lot of uncertainty surrounding the forecasts, although growth risks are generally balanced. Domestic demand could end up being stronger than anticipated if recent declines in wholesale gas prices translate significantly into lower consumer costs and consumption holds up better than expected, according to the report. However, given ongoing geopolitical concerns, a potential reversal of that decline “cannot be ruled out,” according to the report.
The Commission stated that after the reopening of China, external demand could potentially become stronger, which could, however, fuel global inflation, but that inflation risks were mainly related to developments in energy markets.
As a result of a rise in oil and food prices triggered by the Russian invasion of Ukraine, consumer inflation in the euro zone, which hit a record 10.6% in October, is expected to drop to 5. 6% this year and 2.5% in 2024. The decline would be larger than previously anticipated, 6.1% for 2023 and 2.6% for 2024.
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