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Container ship »Berlin Express« in the Port of Hamburg: Germany brings up the rear

Photo: Bodo Marks / dpa

Germany needs more time to recover from the energy price jumps in the wake of Russia's attack on Ukraine: As expected, the German government has lowered its economic forecast – and now expects economic output to shrink this year.

Presumably, Germany will be the only major industrialized country not to grow in 2023. In Berlin, Economics Minister Robert Habeck referred to international conflicts and the ECB's necessary interest rate hikes to combat high inflation. "That's why we're coming out of the crisis more slowly than we thought."

Specifically, the government now expects economic output to shrink by 0.4 percent – instead of an increase of the same magnitude. In 2024 and 2025, growth rates of 1.3 and 1.5 percent are expected to return.

Just yesterday, the International Monetary Fund (IMF) predicted an even deeper recession for Germany. According to the report, Germany is the only major economy to shrink – and more than previously expected: by 0.5 percent.

Germany must now address the structural problems, Habeck said. Bureaucracy must be reduced, more skilled workers must be attracted from abroad and barriers to investment must be removed.

Private consumption is also likely to provide impetus in view of rising wages and a robust labour market. In the first half of 2023, nominal wages rose more sharply than they did in 2008.

With high inflation, the government expects a noticeable easing. After an inflation rate of 6.1 percent this year, values of 2024.2025 and 2.6 percent are forecast for 2 and 0. The European Central Bank (ECB) is aiming for two percent as the ideal level for the eurozone.

apr/Reuters