New HWWI Business Cycle Forecast
The Hamburg Institute of International Economics (HWWI) expects the German economy to recover gradually at best over the remainder of 2023. The slowdown will be triggered by a restrictive monetary policy. The HWWI expects negative economic growth of -½% in 2023. In 2024, the economy could grow again noticeably by 1 ¼ percent. The prerequisites for this are no further tightening of monetary policy or geopolitical uncertainties.
Inflation has peaked, but the increase in consumer prices is still high at 6.1%. Lower energy and other commodity prices suggest a further decline. By the end of this year, the inflation rate could fall below 4%, but at 2 ½%, it could still not quite reach the 2% stability mark by the end of 2024.
However, the risks of a less favorable development are considerable. The European Central Bank (ECB) now faces the challenge of directing further monetary policy stimuli in such a way that the disinflation process that has been initiated can be successfully completed on the one hand and the economy is not completely stifled on the other. “In light of the strong wage increases, further interest rate hikes are likely to be necessary this year in order to at least come close to achieving the goal of stabilizing the price level next year,” says Prof. Dr. Michael Berlemann, Scientific Director of the HWWI.
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Prof. Dr. Michael Berlemann