DIW only expects a mild recession in Germany

DIW only expects a mild recession in Germany

People shopping in Dusseldorf

According to a DIW expert, state aid has stabilized private household consumption.

(Photo: IMAGO/Michael Gstettenbauer)

Berlin Despite headwinds from the energy crisis and higher inflation improve the prospects for Economy in Germany according to the German Institute for Economic Research (DIW). “Economic output is likely to decline somewhat in the winter months, but a severe recession is becoming increasingly unlikely and the economic prospects are cautiously positive,” the Berlin researchers explained on Wednesday.

“Nevertheless, it is too early to be overly optimistic,” warned DIW economics expert Guido Baldi. Because the global risks in particular are still high – not only with regard to the further development of the war in Ukraine.

The German economy will probably be more and more burdened by the cooled global economy. The pandemic situation in China is currently unclear. After the abrupt departure from the strict containment measures, there could be an enormous wave of infections and diseases in the country, which could also exacerbate the problems in the supply chains.

In addition, the tightening of monetary policy by the European Central Bank in view of the high level of inflation is likely to dampen the economy somewhat in the coming year.

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The economic barometer of the German Institute for Economic Research (DIW) was almost unchanged in December at 82.8 points. The DIW emphasized that the current value is still a long way from the neutral 100-point mark, which signals quarterly growth in gross domestic product of 0.3 percent.

Slight relaxation in the industry

There are therefore signs of some relaxation in the manufacturing sector. “Industrial companies are feeling a slight sigh of relief,” said DIW economic expert Laura Pagenhardt.

“However, the crisis is not yet finally over.” The risks of the past few months have largely remained. Supported not least by the federal government’s relief packages and energy price brakes, which stabilized households’ disposable income, private consumption has remained stable until recently. This has also strengthened the service sector.

More: Ifo Institute expects good prospects for the labor market – industry less optimistic

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