The ifo Institute's economic forecast for 2023 and 2024 has been confirmed. As previously suspected, economic output this year will remain at roughly the same level as the previous year (-0.1%). Inflation will continue to weigh on the economy in consumer-related sectors and cause it to contract; by contrast, industrial activity will support growth. The economy is then expected to grow more strongly next year, by 1.7 percent.
"After a further decline in gross domestic product of 0.2 percent in the first quarter, the economy will recover in the further course. From the middle of the year at the latest, rising real wages will support the domestic economy," says ifo economic researcher Timo Wollmershäuser.
Gradually falling inflation rates are also contributing to this, along with noticeable increases in collectively agreed wages.
"The peak of inflation has been reached. On average in 2023, the rate should already be lower than last year at 6.2 percent. In 2024, rates will then normalize and inflation will reach 2.2 percent," he adds.
The reasons for this are falling energy prices and a gradual resolution of supply problems in industry.
Recovery on the labor market
The recovery on the labor market this year will be slowed somewhat by the economic weakness. The increase in the number of unemployed by just under 50,000 is mainly due to Ukrainian nationals, who will be gradually integrated into the labor market over the forecast period. As a result, the unemployment rate is expected to fall again to 5.1 percent as early as next year, following 5.4 percent this year and 5.3 percent last year.
State budget still in the red
This year and next year, the national budget will remain in the red at 1.3 and 0.3 percent of economic output respectively. However, the government financing deficit will be significantly lower than expected in December.
Spending budgeted for the state energy price brakes has been reduced by a good 35 billion euros in total. This is due to lower procurement prices for electricity and gas from today's perspective, which were estimated to be higher in the forecast period.
After the current account balance fell temporarily to 3.8 percent last year because of the sharp rise in import prices, it is expected to rise again to 5.9 percent of economic output by 2024.