9.3 percent – according to the Munich economic research institute Ifo, this is how high the inflation rate will be in Germany next year. In addition, yesterday, Monday, economists forecast an impending recession that would cause Germany’s economy to shrink by 0.3 percent in the coming year.
“We’re going into a winter recession,” said Ifo economic chief Timo Wollmershäuser. The electricity and gas price adjustments at the beginning of 2023 might even push up the inflation rate to around eleven percent in the first quarter. As a result, household incomes would shrink and purchasing power would fall by three percent this year and next – a figure never reached since the introduction of national accounts in 1970.
In view of these forecasts, Wollmershäuser also expects another drastic interest rate increase by the European Central Bank (ECB) to four percent. Just last week, the ECB raised the key interest rate by 0.75 percentage points to 1.25 percent.
Labor market remains stable
Wollmershäuser does not expect growth and inflation to normalize until 2024, when growth will be 1.8 percent and inflation 2.5 percent. On the other hand, the Ifo does not fear serious effects on the German labor market. The increase in employment will only slow down temporarily.