The International Monetary Fund (IMF) has revised its prediction, indicating that Germany will face a more severe recession than previously anticipated. Europe’s traditional growth engine is expected to be the worst-performing major economy in 2023, primarily due to factors such as high inflation and a slump in manufacturing.
The IMF now projects a contraction of 0.5 % the German economy this year, in contrast to its earlier forecast of a 0.3 % contraction made in July. These updated forecasts confirm that Germany, the largest economy in Europe, will be the only one among the Group of Seven wealthy nations not to experience growth in 2023.
The IMF’s report highlights various challenges facing Germany, including weaknesses in interest-rate-sensitive sectors and decreased demand from trading partners. The country, which slipped into a recession at the beginning of 2023 and saw stagnation in the second quarter, is expected to undergo another period of “slight economic contraction” in the second half of the year.
While the IMF foresees a rebound for Germany in 2024, it has revised its growth expectations downward to 0.9 %, compared to the 1.3 % forecasted in July.
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