The German government expects the economy to shrink by 0.4% this year due to persistent inflation, high energy prices, and weak international trade, the economy ministry said on Wednesday, confirming an exclusive Reuters report from last week.
The government had forecast growth of 0.4% for 2023 in its forecast in April, but weakness in the industrial sector and the highest interest rates in a decade raised fears of a recession in Europe's largest zone economy.
The German economy has experienced a recession in the last quarter of 2022 and the first quarter of 2023. A technical recession is defined as two consecutive quarters of contraction.
According to the latest forecasts, the German economy is expected to recover in 2024 and 2025, with growth of 1.3% and 1.5% respectively. Inflation is expected to reach 6.1% this year, growing slowly to 2.6% next year and 2.0% in 2025, based on the forecast.
Earlier this month, the International Monetary Institution (IMF) lowered its forecast for the German economy to contract by 0.5% this year, compared to a 0.3% contraction previously forecast.
