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OECD does not expect Germany to grow economically – global economy to recover

2023-06-07T13:11:30.740Z

Highlights: The OECD does not expect the German economy to grow this year, but only again in 2024. In 2023, the economy will stagnate, then grow by 1.3 percent next year - both weak values on a long-term average. Inflation in Germany will remain far too high for the central banks' taste, but will at least decline. The global economy has probably bottomed out, but there is a long way to go to achieve a strong economic recovery, the OECD says.



The OECD does not foresee any economic growth in Germany this year. © Sina Schuldt / dpa

The OECD, an alliance of 38 market-economy countries, no longer believes that Germany will be able to achieve economic growth this year. They are more optimistic about the global economy in general.

Berlin – The OECD does not expect the German economy to grow this year, but only again in 2024. "High inflation is reducing real incomes and savings," it said on Wednesday in a new analysis by the Organization of Industrialized Countries. In 2023, the economy will stagnate, then grow by 1.3 percent next year - both weak values on a long-term average.

Inflation remains high in Germany

Private consumption will initially be a brake factor. Deutsche Bank CEO Christian Sewing had recently said that at least 30 percent of bank customers could no longer cover their normal expenses from their income, but would have to go to the savings. Exports, on the other hand, are likely to provide growth impetus because supply chain problems are gradually dissolving and the order backlog is high, according to the OECD.

At 6.3 percent this year and 3.0 percent next year, inflation in Germany will remain far too high for the central banks' taste, but will at least decline. Real wages are expected to rise again in 2024 thanks to significant increases following the latest collective bargaining rounds and stabilise consumption. Here, the OECD forecasts a decline of 2023.1 percent for Germany in 4, but private consumption is likely to increase by 2024.1 percent in 6. Government spending is expected to fall by 2023.3 percent in 9, but then rise again by 1.4 percent next year. Exports of goods and services are expected to increase by 1.1 and 2.4 percent, respectively.

Possible gas rationing is a big risk

"There is a significant downside risk from gas prices and potential gas rationing in the coming winter," the OECD said. An end to the war in Ukraine, on the other hand, would strengthen the economic outlook and depress energy prices. "To address the skills shortage, the labour force participation of women, older and low-skilled workers should be increased, and education and training should be improved."

According to the OECD, the global economy has probably bottomed out. However, there is a long way to go to achieve a strong economic recovery. "Compared to the past, however, it will be weak. For 2023, we expect global growth of 2.7 percent, which should pick up slightly to 2024.2 percent in 9. This means that it will still be well below the average of the ten years before the Corona pandemic." Core inflation remains too high, as does debt. Further interest rate hikes are probably necessary in the fight against inflation. In the event of problems in the financial market, central banks should provide liquidity to prevent contagion effects. (REUTERS, lf)

Source: merkur

All news articles on 2023-06-07

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