Germany’s economic outlook improves, but still cloudy

The short-term outlook for Europe’s biggest economy has improved in recent months, says a report by the German Council of Economic Experts. on Wednesday, but only to a limited degree.

The panel said any recovery appears to be limited by soaring inflation, tighter financing conditions and sluggish foreign demand.

What the experts said

The near-term outlook for the German economy has slightly improved on account of an initially stabilized power supply situation and lower wholesale prices, the report said.

The board predicted Gross Domestic Product (GDP) growth of 0.2% in 2023, compared to the previous forecast that it would decline – also by 0.2%.
The five experts who compiled the report said they expected 1.3% growth in 2024.

However, they said, the continued rise in inflation was causing a loss of purchasing power and dampening consumer demand.

Meanwhile, rising interest rates worsened financing conditions and led to a drop in investment.

While inflation is expected to decline over the course of the year, the panel said, it will remain significantly higher – at an average of 6.6% in 2023.

Experts said they expected inflation of around 3% in the coming year.

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