FX.co ★ Germany’s growth outlook revised down for 2023

Germany, Europe's leading economy, has recently revised its economic growth forecast. Despite its best efforts to remain resilient, the nation finds itself navigating turbulent times, leading to a less optimistic economic outlook than was previously anticipated. The European Commission has cut its forecast for the eurozone’s economic powerhouse, expecting it to shrink by 0.4% in 2023. Notably, this spring, the German government projected a positive growth trajectory for the country, anticipating a similar growth rate by December 2023. Several factors have contributed to the revised outlook, the most alarming being persistent inflationary pressures and soaring energy prices. The government's statement also highlighted the subdued pace of global trade recovery, asserting its continued strain on Germany's export-driven economy. Among other negative factors is weak business activity in the industrial sector, coupled with the highest interest rates the country has witnessed in a decade. Despite these challenges, the German authorities remain hopeful for the future, anticipating a positive shift over the next few years. According to the new report, Germany’s headline inflation is expected to come down to 6.1% in 2023 and to slow to 2.6% in 2024. The government underscored its target inflation rate, aiming for consumer price growth to stabilize around 2%. The gross domestic product of the eurozone’s biggest economy is projected to expand by 1.3% in 2024, followed by a promising rise of 1.5% in 2025.