The Russian attack on Ukraine with the sharp increase in energy prices is dampening the economic recovery in Germany. The Munich ifo Institute has cut its forecast for economic growth for this year to 2.5 percent, from 3.1 percent as planned in March.
In the coming year, the ifo Institute now expects an acceleration to 3.7 percent. Inflation is likely to increase to 6.8 percent and only fall to 3.3 percent next year. “Economic output is currently still one percent below the pre-corona level at the end of 2019,” says Timo Wollmershäuser, head of ifo forecasts.
“However, we expect a gradual decline in raw material prices and material bottlenecks in the second half of the year.”
Thanks to a noticeable increase in spending on services, however, private consumption did not fall overall in the first quarter, but remained stable. The slowdown in the corona wave and the normalization of the spending behavior of private households were reflected here. This normalization should continue over the course of the year and thus make a significant contribution to the growth of the German economy.
For 2022, the ifo Institute expects the number of unemployed to fall from 2.6 million to 2.3 million, which corresponds to 5.0 percent after 5.7 percent. In the coming year, the number will remain almost unchanged. The hole in the state treasury should be halved this year from 131 to 65 billion euros and will only reach 12 billion euros in the coming year.
The much-criticized international current account surplus (exports, imports, services and transfers) will fall to 181 billion euros this year, from 265 billion in 2021. For the coming year, the Ifo Institute expects a surplus of 241 billion euros again.
