More Eurozone Woes28 Sep 2023 11:52
The main player in the Eurozone is the centre of attention again.
German recession will be worse than feared, economists warn
A recession in Germany this year will be worse than previously feared, leading economic institutes have warned, as high inflation and an industrial slowdown hit Europe’s top economy.
The economy will shrink 0.6pc in 2023, the institutes said in their latest joint forecast. They had all flagged in recent months that a downturn was expected, although the figure is worse than those previously mentioned.
Oliver Holtemoeller, from the Halle Institute for Economic Research, one of the five groups behind the forecast, said: “The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected.”
German policymakers face challenges on multiple fronts - from still-high inflation that began surging after Russia invaded Ukraine, to weakness in manufacturing and the impact of record eurozone interest rates.
It comes as German inflation is likely to ease significantly in September based on data from five key German states today, signalling what could be the beginning of the end for high inflation that has weighed heavily on Europe’s largest economy.
Inflation in all five states - Bavaria, Baden-Wuerttemberg, Brandenburg, North Rhine-Westphalia and Hesse - fell by at least a percentage point, with Baden-Wuerttemberg recording the largest drop, to 5.1pc in September from 7pc the month before.