German government doubles 2023 growth forecast to 0.4%

The German government has doubled its growth forecast this year for the Europe’s largest economy after the country made it through the winter without major energy problems

Germany Politics (Copyright 2023 The Associated Press. All rights reserved)

The German government on Wednesday doubled its growth forecast this year for Europe's largest economy after the country made it through the winter without major energy problems.

It said it now expects gross domestic product to grow by 0.4% — up from the 0.2% expansion it forecast in late January, which in turn was a big improvement on the 0.4% contraction predicted in October. The government expects growth to accelerate to 1.6% next year.

The new government outlook for 2023 is a bit more optimistic than that of a group of four leading German economic research institutes, which earlier this month forecast growth of 0.3%. The International Monetary Fund recently predicted that German GDP will decline by 0.1% this year.

Economy Minister Robert Habeck said the economy has proven to be “adaptable and resilient” in the energy crisis triggered by Russia's invasion of Ukraine. Russia — once Germany's biggest natural gas supplier — halted gas deliveries to the country and largely to the rest of Europe last summer.

Germany filled its storage facilities, reduced its gas use and opened its first liquefied natural gas terminals, getting through a relatively mild winter without the energy catastrophe that was once feared.

Habeck said efforts by Chancellor Olaf Scholz's government to soften the impact of high energy prices also have paid off.

Inflation remains high, however. It has declined from the levels it reached last year, but the annual inflation rate still stood at 7.4% in March, eroding consumers' purchasing power. The government said it expects inflation to average 5.9% this year, down a bit from 6.9% in 2022, and fall to 2.7% next year.

The economy shrank by 0.4% in the last three months of 2022, though it managed full-year growth of 1.8%.

Recent economic figures have given grounds for optimism, with factory orders and exports increasing in February and a closely watched barometer of business confidence rising for the past seven months. First-quarter GDP figures are due Friday.