Bundesbank: German Economic Recovery Subject to Time Lag

15 December 2023

By Isabel Teles – FRANKFURT (Econostream) – Economic recovery in Germany will happen with a time lag, the German Bundesbank said on Friday in its latest semi-annual forecasts.

After a 0.1% fall in 2023, the calendar-adjusted GDP would increase by 0.4% next year, the forecasts said. In 2025 and 2026, the economy was expected to grow by 1.2% and 1.3%, respectively, according to the report.

‘[T]he economic recovery is subject to some time lag. At present, weak foreign demand is the main drag on industry; in addition, private consumption is still restrained, and higher financing costs are dampening investment. But the picture will soon brighten up’, the Bundesbank said.

Inflation was likely to come down to an annual average of 6.1% this year and to fall to 2.7% in 2024, the Bundesbank said.

However, it was still early to declare the situation completely under control, European Central Bank Governing Council member Joachim Nagel, who heads the German Bundesbank, said.

‘[I]nflation in Germany is on the decline, but it is still too early to sound the all-clear’, he warned.

According to the report, since the last semi-annual forecasts, ‘the Bundesbank’s experts lowered their projection of the GDP growth rate significantly for 2024 and slightly for 2025. The inflation rate was revised downward noticeably for 2024 and slightly for 2025.’

There was uncertainty about fiscal policy decisions, in particular about energy transition, the report said. ‘In addition, there are risks to the forecast owing, in particular, to geopolitical conflicts’, it said.