BERLIN (Reuters) – The German government expects the economy to shrink by 0.4% this year due to persistent inflation, high energy prices and weak international trade, the economy ministry said on Wednesday, confirming a Reuters exclusive from last week.
The government had predicted growth of 0.4% for 2023 in its April forecast, but weakness in the industrial sector and the highest interest rates in a decade are spurring fears of recession in the euro zone’s largest economy.
The German economy already suffered a recession in the last quarter of 2022 and the first quarter of 2023. A technical recession is defined as two consecutive quarters of contraction.
According to the latest forecast, the German economy is expected to rebound in 2024 and 2025, growing by 1.3% and 1.5%, respectively.
Inflation is expected to come in at 6.1% this year, slowing to 2.6% next year and 2.0% in 2025, the forecast shows.
Earlier this month, the International Monetary Fund cut its forecast for the German economy to a 0.5% contraction this year, compared with a 0.3% decline projected previously.
(Reporting by Maria Martinez, Editing by Friederike Heine and Rachel More)