The Institute of German Economics expects a decline in Germany’s real GDP by up to 0.5% for the year 2023, because of high interest rates, energy price inflation and weak exports that are crippling the German economy.
The institute said in its new report that the German economy’s usual focus on global markets and the high rate of exports is suffering under the pressure of geopolitical shocks such as the Ukraine war and tensions with China.
The institute stated that the country’s high share of industry in accordance with international standards and its energy-intensive industries mean that it also bears the brunt of current supply chain risks and cost shocks more than other countries.
Meanwhile, on a domestic level, the institute says Germany is suffering from high inflation and private consumption, which is slowing the economy.
Therefore, the economic output at the end of 2023 will be close to that recorded at the end of 2019, according to the Institute’s experts, for the third and fourth quarters of 2023, they estimate that economic output will decline.
On average, the institute expects 2.58 million unemployed in 2023, an increase of 160,000 over the previous year.
This would cause the unemployment rate to rise to 5.5%. Experts do not expect major layoffs, but say those already unemployed will have more difficulty finding new jobs.
The Institute’s experts expect that the inflation rate in 2023 will be slightly lower than the previous year’s level at 6.5%.