ifo forecast
Russian attack dampens economic recovery
The Russian attack on Ukraine and the sharp rise in energy prices are dampening the economic recovery in Germany. The ifo Institute has cut its economic growth forecast for this year to 2.5 percent, down from 3.1 percent as forecast in March.
The ifo now expects an acceleration to 3.7% in the coming year. Inflation is likely to rise to 6.8 percent and only fall back to 3.3 percent next year. "Economic output is currently still one percent below the pre-corona level at the end of 2019," says Timo Wollmershäuser, Head of Forecasts at ifo. "However, we expect a gradual decline in commodity prices and material shortages in the second half of the year."
"The loss of purchasing power of private households associated with the high prices was reflected in a decline in the consumption of goods at the start of the year," adds Wollmershäuser. However, thanks to a noticeable increase in spending on services, private consumption as a whole did not fall in the first quarter, but remained stable. This reflected the easing of the corona wave and the normalization of private household spending patterns. This normalization is likely to continue over the course of the year and thus make a significant contribution to the growth of the German economy.
For 2022, the ifo Institute expects unemployment to fall to 2.3 million people from 2.6 million, which corresponds to 5.0% after 5.7%. The figure will remain almost unchanged in the coming year. The hole in the state coffers is likely to halve this year from 131 to 65 billion euros and reach only 12 billion euros next year. The internationally much-criticized current account surplus (exports, imports, services and transfers) will fall to EUR 181 billion this year, down from EUR 265 billion in 2021. The ifo Institute expects a surplus of EUR 241 billion again next year.
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