German economy seen contracting in 2023 on persistent inflation, Ifo Institute says

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Germany’s economy is expected to contract slightly this year, before a rebound in 2024, the Ifo Institute said Wednesday.

The country’s economic output is seen declining 0.1% in 2023, after a 0.2% fall in gross domestic product in the first three months, with consumer-related industries expected to suffer from high inflation, but manufacturing activity supporting growth, the economic-research organization said.

Germany’s government said in January that it expected a small 0.2% expansion of the economy in 2023.

Following the first three months of the year, increases in wages agreed by collective bargaining and a gradual fall in inflation will contribute to an improved economic situation, Ifo said.

“Starting mid-year at the latest, rising real wages will support Germany’s domestic economy,” Ifo economic researcher Timo Wollmershaeuser said.

The economy is then expected to grow by 1.7% in 2024, as price increases return to normal and inflation is seen falling to 2.2%, prompted by falling energy prices and the easing of supply problems in manufacturing, the Munich-based institute said.

Write to Ed Frankl at

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