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Germany revises its 2023 growth forecast to positive growth, strengthening supply-side policies

The German federal government adopted and announced its annual economic report on January 25th. The report states that the real GDP growth rate for 2023 has been revised upward by 0.6 points from the autumn forecast of 2022 and is now predicted to be 0.2% growth. This revision is based on various measures to support the energy crisis, including the price limitation system for gas and electricity (price brake), the high adaptability and resilience of the German economy, and significant energy savings. The GDP growth rate for 2024 is expected to be 1.8%.

The consumer price index is also expected to remain at a high level of 6.0% in 2023, but it is expected to decrease from the 7.9% of 2022, indicating that the trend has begun to reverse. It is expected to settle at 2.8% in 2024.

Regarding this announcement, Economy and Climate Protection Minister Robert Habeck stated that "even if there is a recession, it is expected to be shorter and milder."

This positive trend can also be seen in the ifo Institute's business climate index. The index for January, announced by the institute on the 25th, was 90.2 (an increase of 1.6 points from the previous month), and the expectations index for the next 6 months was 86.4 (an increase of 3.2 points), both of which have improved for 4 consecutive months. Institute Director Clemens Fuest said "The German economy is starting the new year with more confidence."

In addition, the consumer price index has been on a downward trend since November 2022, and it should also be noted that the producer price index (industrial products), which can be considered as a leading indicator of the consumer price index, has also decreased significantly: 45.8% in September 2022, 34.5% in October 2022, and so on.


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