German economy expected to skirt recession – economy ministry report

According to a Friday economy ministry assessment, Germany will narrowly avoid recession and increase in the first quarter.

“A technical recession of two negative quarters in a row appears to have been averted,” the ministry stated.

It stated that 2023 GDP predictions foresee a small year-over-year increase. Leading German economic institutes forecast 0.3% growth this year.

The report claimed industrial and construction activity grew in the first quarter due to material bottlenecks easing, dropping energy prices, and favorable weather.

The institute’s Joint Economic Forecasts predict a 0.1% first-quarter GDP increase. This follows a 0.4% decline in Q4 2022.

The ministry said the year started well. The ministry noted that Germany and Europe had enough gas due to a mild winter and high gas storage levels, resulting in a decline in energy prices.

“Consumer sentiment is expected to continue its recovery in coming months, although inflation-related losses in purchasing power continue to weigh on the economy,” the research added.

Inflation is likely to decrease in the following months, but stay high. Inflation is expected to be 5.4% to 6.6% in 2023 and 2.1% to 3.5% in 2024.

The economy ministry worries about sluggish private consumption, construction concerns, financial institution issues, and geopolitical uncertainty due to the Ukraine war.