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German economy expected to contract 0.4% in 2023 – economy ministry

German economy expected to contract 0.4% in 2023 - economy ministry
© Reuters. FILE PHOTO: Shipping containers are seen onboard the Hapag-Lloyd container ship Chacabuco at the HHLA Container Terminal Altenwerder, on the River Elbe in Hamburg, Germany March 31, 2023. REUTERS/Phil Noble/File Photo

BERLIN (Reuters) – The German government expects the economy to shrink by 0.4% this year due to persistent inflation, high energy prices and weak international trade, the economy ministry said on Wednesday, confirming a Reuters exclusive from last week.

The government had predicted growth of 0.4% for 2023 in its April forecast, but weakness in the industrial sector and the highest interest rates in a decade are spurring fears of recession in the euro zone’s largest economy.

The German economy already suffered a recession in the last quarter of 2022 and the first quarter of 2023. A technical recession is defined as two consecutive quarters of contraction.

According to the latest forecast, the German economy is expected to rebound in 2024 and 2025, growing by 1.3% and 1.5%, respectively.

Inflation is expected to come in at 6.1% this year, slowing to 2.6% next year and 2.0% in 2025, the forecast shows.

Earlier this month, the International Monetary Fund cut its forecast for the German economy to a 0.5% contraction this year, compared with a 0.3% decline projected previously.

Source: Investing.com

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