BERLIN The German economy will contract in 2023 and can only expect a slight recovery next year, according to the annual report of the German Council of Economic Experts published on Wednesday.
Germany's gross domestic product is expected to contract by 0.4% in 2023, according to the economic experts, in line with the forecasts of the German government.
The energy crisis and reduced real incomes due to inflation are still weighing on the short-term economic outlook, the economic experts said. Furthermore, high interest rates are taking their toll on construction and investment.
For 2024, the German Council of Economic Experts forecasts growth of 0.7%, well below the 1.3% in the government forecasts.
The medium-term growth prospects are therefore at an all-time low, according to the report.
"In order to overcome weak growth, Germany must invest in its future," said Monika Schnitzer, chair of the council. "This requires greater productivity through innovations, investments and more dynamism in start-ups."
German Chancellor Olaf Scholz said on Wednesday that he is confident that the economy will grow again in 2024 through a package of measures to promote investment.
"We have to make sure we get back on track," he said, when receiving the experts' report. "It's about future growth, and we want to see that again in 2024."
Schnitzer added that reforms are "urgently needed" also in the tax system and the pension system.
According to the council's forecasts, the inflation rate will fall to 2.6% in 2024, from an expected rate of 6.1% in the current year.
As prices ease, private consumption should recover, making a positive contribution to growth next year, the economists said.
(Reporting by Maria Martinez; Editing by Miranda Murray and Toby Chopra)
