German economy endured a “sharp setback” in the winter half-year, primarily due to soaring inflation and noticeably weakened demand, as per the latest report from Germany’s Ifo Institute.
The country’s GDP is predicted to decline by -0.4% this year, before witnessing a rebound with a 1.5% growth next year. The institute also anticipates a gradual decrease the inflation rate, dropping from 6.9% in 2022, to 5.8% in 2023, and then 2.1% in 2024.
In terms of inflation, the Ifo Institute anticipates a further decrease in inflation rates in the coming months, with producers likely to pass on price reductions for intermediate input costs, particularly energy, to their customers.
Nevertheless, wage growth is likely to accelerate throughout the year due to more inflation bonuses being distributed and the effect of noticeable increases in collectively agreed wages.
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