Germany to skirt recession this year – institutes

BERLIN (Reuters) – Germany is expected to narrowly escape recession and post modest growth in the first quarter of the year, according to the forecasts of leading economic institutes published on Wednesday.

The institutes said in their Joint Economic Forecasts they expect a 0.1% expansion in gross domestic product in the first quarter, confirming a report by Reuters on Tuesday. This follows a 0.4% contraction in the fourth quarter of 2022.

For 2023 as a whole, they expect the German economy to grow 0.3%, up from a predicted contraction of 0.4% in autumn.

The economic institutes predict an inflation rate of 6.0% in 2023, before it slows to 2.4% in 2024. They forecast that unemployment will be at 5.4% this year and at 5.3% in 2024.

“The impact of the weakening of the economy during the winter on the labour market will be limited,” they said.

The forecast that the European Central Bank would take key rates to a peak of 4.0% by this summer, with modest rate cuts possible from the middle of next year.

German exports started the year as a drag on the economy but a recovery is expected thanks to easing supply chain constraints and high industrial orders, they noted.

The institutes estimate exports to have fallen 0.7% in the first quarter of the year, but that should be compensated with an increase of 0.9% in the second quarter.

In 2023 as a whole, exports are predicted to grow by 0.6%. In 2024, there will a bigger rise of 3.4%.

(Reporting by Maria Martinez; Editing by Rachel More and Mark John)