The outlook for the German economy brightened slightly after energy prices eased.
Economic output should fall “slightly” again during the year, but is likely to be “a bit better” now than expected at the end of 2022.
In its December report, the bank forecasted that the economy would shrink by 0.53% in 2023.
Businesses and consumers worldwide have picked up slightly. Recessionary fears have eased somewhat. The apparent easing of Europe’s energy crisis must’ve helped it. Inflationary pressures have also eased somewhat.
This year, the Bundesbank said it expects lower energy prices to further reduce inflation, while falling producer prices for intermediate goods in the manufacturing companies may also curb commodity price inflation.
The forecast is more pessimistic than the EC’s last week, which predicted that Germany would grow by 0.25% in 2023.
Confidence in the economy of Europe’s biggest country got better from historically low readings recently. This is because winter weather was unusually warm and there was plenty of gas in storage.
Inflation remains an issue
Despite recent energy cost declines, underlying pressures should ease, then rise.
The EU economy will not have a dire recession in 2023, when inflation decreases and gas prices fall. This will make the economy better than expected.
The report offers some good news amid a still highly uncertain and complex landscape. This is mostly due to how Russia invaded Ukraine. The invasion is approaching its first anniversary.
Nevertheless, the EC can project that the EU will see a growth rate of 0.84% in 2023 – up from the previous forecast of 0.35%.
Meanwhile, the Eurozone will expand by 0.92% – up from an estimated 0.33% in the autumn.
