(Bloomberg) — The German government raised its forecast for 2023 output for a second time and said Europe’s biggest economy will expand by twice as much this year as previously expected.
(Bloomberg) — The German government raised its forecast for 2023 output for a second time and said Europe’s biggest economy will expand by twice as much this year as previously expected.
While the anticipated 0.4% increase in gross domestic product would still be relatively weak, experts in the economy ministry in Berlin were projecting a contraction of the same magnitude as recently as October and in January predicted expansion of 0.2%.
The improved outlook underscores how government support for companies and households helped the euro region brush off both high inflation and widespread industrial action to defy warnings of a winter recession.
Economy Minister Robert Habeck said Germany has shown itself to be “adaptable and resilient” when dealing with the impact of the coronavirus pandemic followed by the energy crisis triggered by Russia’s war on Ukraine.
“We helped companies and private households in a difficult period and curbed high energy prices,” Habeck said Wednesday. “We now see that a gradual recovery is underway, despite a persistently difficult environment.”
Next year, the government expects growth to accelerate to 1.6%, Habeck added, which represents a small downward revision of his ministry’s January forecast of 1.8%. Inflation is seen slowing to 5.9% this year, from 6.9% in 2022, and dropping to 2.7% in 2024.
Habeck’s ministry is a bit more optimistic about growth this year than Chancellor Olaf Scholz’s independent Council of Economic Experts, which last month predicted 0.2%. In a joint forecast, the country’s leading economic research institutes said this month that they expect 2023 expansion of 0.3%.
A stronger-than-anticipated recovery in manufacturing at the start of the year probably helped Germany eke out growth in the first quarter, the Bundesbank said this week ahead of official GDP data due to be published on Friday.
Economists polled by Bloomberg predict output increased by 0.2% in the January to March period following a contraction of 0.4% in the fourth quarter that had raised doubts about the health of the economy.
“Companies can once again be somewhat more confident about 2023,” Laura Pagenhardt at the Berlin-based DIW research institute said Wednesday.
“Nevertheless, the situation can only be expected to improve gradually,” Pagenhardt said by email, adding that risks to the outlook include both ongoing geopolitical uncertainty and significant increases in borrowing costs by the European Central Bank.
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