People visit a shopping mall in Berlin, Germany, on Feb. 1, 2023. (Photo by Stefan Zeitz/Xinhua)
"Given the severity of the crisis and the halt in supplies of oil and gas from Russia, the German economy is doing valiantly, confirming its ability to adapt quickly to new circumstances," IfW Kiel President Moritz Schularick said in a statement. "But it's also clear that the energy crisis has left its marks."
BERLIN, June 15 (Xinhua) -- Two leading German economic institutes expect Europe's largest economy to shrink slightly in 2023, according to their forecasts published on Thursday.
The German Institute for Economic Research (DIW Berlin) predicts that the country's gross domestic product (GDP) will fall by 0.2 percent year-on-year, while the Kiel Institute for the World Economy (IfW Kiel) even lowered its outlook to minus 0.3 percent.
"Given the severity of the crisis and the halt in supplies of oil and gas from Russia, the German economy is doing valiantly, confirming its ability to adapt quickly to new circumstances," IfW Kiel President Moritz Schularick said in a statement. "But it's also clear that the energy crisis has left its marks."
Germany slipped into a technical recession after two consecutive quarters of economic contraction during winter. Following a decline of 0.4 percent in the final quarter 2022, Germany's GDP fell by 0.3 percent in the first three months of 2023.
This photo taken on Nov. 11, 2022 shows goods in a shopping trolley at a supermarket in Berlin, capital of Germany. (Xinhua/Ren Pengfei)
Although energy prices in Germany have fallen significantly in recent months, inflation remains way above the 2 percent target of the European Central Bank (ECB). In May, the inflation rate still stood at 6.1 percent, mainly driven by food prices, according to the Federal Statistical Office (Destatis).
To bring down inflation in the eurozone, the ECB raised its key interest rate by another 0.25 points to 4.0 percent on Thursday. "Inflation has been coming down but is projected to remain too high for too long," ECB President Christine Lagarde said when announcing the eighth rate hike in a row.
Despite rising interest rates, Germany's economy was already "slowly veering toward recovery," DIW Berlin said. For next year, the institute expects the country's GDP to grow by 1.5 percent. The IfW Kiel even expects growth of 1.8 percent in 2024.
"Less sharp price increases, rising real incomes and higher consumer spending are likely to be key to the economic recovery," DIW Berlin expert Timm Boenke said.
For the global economy, DIW Berlin expects a stronger recovery this year and in 2024, with growth of 3.5 percent and 4.1 percent, respectively. "The momentum is primarily coming from emerging economies like China, while advanced economies, especially those in the eurozone, are lagging behind."
Pedestrians walk past shopwindows of a shopping mall in Frankfurt, Germany, Jan. 15, 2022. (Xinhua/Lu Yang) ■
