BERLIN (Reuters) – Germany is expected to narrowly escape recession this year and post modest growth in the first quarter, the country’s leading economic institutes said on Wednesday.
The five main institutes (Ifo, IfW, IWH, RWI and DIW) forecast growth of 0.1% in their central scenario for the period January-March, as reported by Reuters as early as Tuesday, after a decline in gross domestic product 0.4% in the fourth quarter of 2022.
For the current year, they expect the German economy to grow by 0.3%, against a contraction of 0.4% expected in the fall.
Their new revisions show an inflation rate expected at 6.0% in 2023, before slowing to 2.4% in 2024. The unemployment rate could settle at 5.4% this year and then at 5.3% in 2024.
“The impact of the weakening economy over the winter on the labor market will be limited,” they said.
Leading institutes predict that the European Central Bank (ECB) will raise its deposit rate to 4.0% by summer, up from 3% currently, and may proceed with rate cuts from mid -2024.
German exports dampened the economy at the start of the year but a recovery is expected thanks to easing supply chain constraints and strong industrial orders, they noted.
The institutes estimate that exports fell 0.7% in the first quarter, a decline that should be offset by a 0.9% increase in the second quarter.
Over the year, exports should grow by 0.6% then accelerate in 2024 with an increase of around 3.4%.
(Maria Martinez, Laetitia Volga, edited by Blandine Hénault)
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