BERLIN – 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.
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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 projected new level “of course is not at all satisfactory measured against normal years, but measured against what we had to fear in the winter of 2022-2023, it's quite an exclamation mark.”
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. And he said that “inflation is past its peak.”
It does remain high, however, fueled by food prices even as energy prices recede. 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.