German economy will contract in 2023, government advisers say

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BERLIN (AP) — The German government’s panel of independent economic advisers predicted on Wednesday that Europe’s largest economy will contract by 0.2% next year.

The report from the five-member panel came after official figures from late last month showed unexpected growth in the third quarter, driven by private spending.

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But a weak winter, with a drop in gross domestic product in the last months of the year and the first three months of next year, is still widely expected. Two consecutive quarters of negative growth is a technical definition of recession, but the 19-nation eurozone has a body that also uses a broader set of data, including employment figures and the extent of economic decline. , to determine when a recession occurs.

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Advisors’ forecast of 1.7% growth this year and a 0.2% decline in 2023 contrasts with a forecast in late March that German GDP would grow 1.8% this year and 3. 6% next year.

That’s even more optimistic than a forecast by the government itself a month ago, which predicted growth of 1.4% this year and a decline of 0.4% next year.

Inflation rose to 10.4% in October as energy prices remain high, and the problem is unlikely to go away anytime soon. Wednesday’s report predicted an average annual inflation rate of 7.4% next year, slightly below 8% this year.

Officials say Germany is well positioned to weather the winter with enough energy after Russia cut off natural gas supplies, but stress it will still have to conserve the fuel that heats homes, powers factories and generates electricity.

Federal and state officials agreed last week on key details of a plan to provide up to 200 billion euros (dollars) in subsidies to households and businesses to ease pressure from high prices gas, electricity and heating until 2024.