“When the gross national product contracted by another 0.2 percent in the first quarter, the economy will recover during the next year. Rising real wages from the middle of the year at the latest will support the German household, says ifo’s economist. Timo Wollmershäuser.
Positive factors are the considerable increase in wages in collective agreements and the gradual decrease in the rate of inflation. “Inflation has reached its peak. The average interest rate of 6.2 percent in 2023 is expected to be lower than last year. In 2024, price increases will return to normal and inflation will fall to 2.2 percent, he adds. This will be influenced by the drop in energy prices and the gradual easing of industrial supply problems.
The weakness of the economy will somewhat slow down the recovery of the labor market this year. The increase in the number of unemployed by almost 50,000 is mainly due to Ukrainian citizens gradually integrating into the labor market during the forecast period. Already next year, the unemployment rate is thus expected to drop again to 5.1 percent, while it was 5.4 percent this year and 5.3 percent last year.
The state budget will be in the red this year to 1.3 percent and next year to 0.3 percent of economic output. However, the public financing deficit is significantly smaller than expected in December. In particular, the expenditures budgeted for state energy price brakes have been reduced by a total of more than 35 billion euros, because from today’s point of view, the wholesale prices of electricity and gas are lower than expected in the forecast period. The current account balance will rise again to 5.9 percent of GDP by 2024, after temporarily falling to 3.8 percent last year due to a sharp rise in import prices.
HT
Source: ifo Institute
Source: The Nordic Page