German government slightly raises 2023 GDP forecast

The German government has raised its economic growth forecast for this year to 0.4% from a previously predicted 0.2%, according to its spring economic projections published on Wednesday and first reported by Reuters last week.

“A gradual recovery is underway, despite a persistently difficult environment,” Germany Economy Minister Robert Habeck said.

Current economic indicators such as industrial production, orders received and business climate point to an economic revival in the course of the year, the report said.

“For next year, we expect the recovery to continue and gain in breadth,” Habeck said.

For 2024, the government slightly lowered its growth forecast to 1.6% from the 1.8% foreseen in January.

Inflation forecasts were also adjusted down, with the rate for both 2023 and 2024 now seen 0.1 percentage point lower, at 5.9% and 2.7%, respectively. Inflation stood at 6.9% last year.

Despite government support measures and rising incomes, private consumption will be weak due to inflation-related losses in purchasing power, the report said. It will only pick up again later in the year as inflation continues to decline.

With the new projections, the government is slightly more optimistic than the five economic institutes that prepare the Joint Economic Forecasts, which foresee 2023 economic growth of 0.3%.