For the time being, consumers must continue to adjust to high inflation. The peak of the wave of inflation should now have been reached, said the head of economic activity at the ifo Institute, Timo Wollmershäuser, on Wednesday in Berlin. However, a noticeable decline in the increase in consumer prices will still be some time in coming. Leading research institutes do not expect this to happen until next year.
However, like the federal government and the “economic experts” before them, the institutes see a better economic situation in Germany. In the current year, the four institutes are expecting a mini-growth in gross domestic product of 0.3 percent. Back in the fall, they had expected a fall of 0.4 percent and an imminent recession.
“The economic setback in the winter half-year is likely to have been less severe than feared in the autumn,” said Wollmershäuser. The decisive factor is a lower loss of purchasing power as a result of significantly falling energy prices. But there are also bleak prospects
development of inflation
According to the forecasts of the institutes, the inflation rate in 2023 will remain relatively high at an average of 6 percent and only slightly lower than in the previous year at 6.9 percent. Only in the coming year is it then expected to drop noticeably to 2.4 percent – mainly due to declining energy prices. The high price increases result in a loss of purchasing power. The institutes anticipate that consumer activity will again make a positive contribution to economic growth from the second half of the year. Government relief measures and expected wage increases boosted domestic demand.
An “economic miracle” is missing
Last month, Chancellor Olaf Scholz (SPD) announced that high growth rates, like those seen during the “economic miracle” of the 1950s and 1960s, are to be expected due to the high level of investment in climate protection. The economic researchers, however, warned of an illusion. On the contrary, the medium-term growth prospects are rather meager. The German economy is more like the pace of a horse-drawn carriage, in which the number of draft animals is declining, said Stefan Kooths from the Kiel Institute for the World Economy in view of the lack of skilled workers. For the coming year, the institutes expect growth of 1.5 percent.
Tense situation on the real estate market
The construction industry and above all residential construction have been hit hard by the turnaround in interest rates. Real estate loans have become more expensive. The institutes do not see a “credit crunch” yet, but there are risks. The institutes assume that the financing conditions for companies and private households will deteriorate. According to the forecast, excessive real estate prices, which have developed in the course of the long phase of low interest rates, are now about to be corrected. However, before this has been completed across the board, the demand for construction services will hardly pick up again. In order to counteract a slump in residential construction, the institutes propose significantly reducing the real estate transfer tax.
Good signals on the labor market
The institutes have good news for the labor market. The number of people in work is likely to increase further, from 45.6 million in 2022 to 45.9 million in 2023 and 46.0 million in 2024. According to the forecast, the number of unemployed will rise temporarily this year from 2.42 2.48 million as Ukrainian refugees did not immediately find a foothold in the labor market. In the coming year, however, unemployment is likely to fall again to 2.41 million people.
assessment of the economy
“A rapid upswing is not to be expected,” commented the general manager of the German Chamber of Industry and Commerce, Martin Wansleben. The economy is heading towards stagnation. Domestic investment is weak. Companies need tax relief, and unnecessary bureaucracy needs to be reduced.
The federal government will present its spring forecast at the end of April. Economics Minister Robert Habeck (Greens) sees the situation stabilizing despite the enormous burdens and uncertainties caused by the Russian war of aggression in Ukraine and the energy crisis. “Germany has mastered the extreme challenges; it has shown what it can and what is possible if we act together and with determination. We must also act with this determination in 2023.”
The so-called joint diagnosis is prepared by four institutes twice a year, in spring and autumn. The Ifo Institute, the Kiel Institute for the World Economy, the Leibniz Institute for Economic Research Halle and the RWI – Leibniz Institute for Economic Research Essen are involved.
