BERLIN (Reuters) – Germany’s IfW economic institute sharply lowered its forecast for the German economy next year, predicting that it would shrink due to high energy prices as a result of the Ukraine war.
The IfW predicted that the German economy will contract by 0.7% in 2023. In June, it had predicted that Europe’s largest economy would see growth of 3.3% in 2023.
For this year, the institute still expects the German economy to grow, but not as strongly, lowering its growth forecast to 1.4% from its previous prediction of 2.1%.
IfW, one of the Germany’s leading institutes and part of a group that advises the government, also raised its inflation forecast for this year to 8.0% from 7.4% predicted earlier.
For 2023, inflation is expected to hit 8.7%, the institute said, up from its previous forecast of 4.2%.
“The recent price jumps for electricity and gas will noticeably reduce the purchasing power of private households and lead to a decline in private consumer spending,” it said.
(Reporting by Rene Wagner, Writing by Miranda Murray; Editing by Madeline Chambers)
