Contraction forecast for German companies in 2023

The German Institute for Economics (IW) announced the results of the expectations survey for 2023 that it conducted with 2,500 German companies. According to the survey, 39 percent of companies in Germany expect a decline in their business activity this year.

The companies cited high energy costs, supply chain problems and the ongoing war in Ukraine as the reasons.

While only 32 percent of the companies that participated in the survey rated their current business situation as better than a year ago, the rate of companies reporting that their current situation is worse increased by a third compared to the previous year.

‘SEVERE RECESSION IS FORECAST IN THE CONSTRUCTION INDUSTRY’

In the IW report, “A severe recession is forecast in the construction industry and pessimism prevails in the industry. The deterioration of production expectations for 2023 is observed at almost the same rate in all economic areas.

“The risk of gas shortages in the current winter season is not as present as in the summer of 2022, and energy prices have declined since then. However, prices remain high and production cuts are inevitable.

Although high energy prices, continued supply shortages and unusually high interest rates negatively affect the activities of German companies, according to the survey, 39 percent of companies operating in the manufacturing sector are pessimistic and 28 percent are optimistic about 2023.

REDUCTION ORDERS SCHEDULE IN THE MANUFACTURING SECTOR

Meanwhile, Germany’s manufacturing sector has been struggling with declining orders in recent months amid weakening demand amid the global economic slowdown.

Although the threat of gas shortages in the industry has diminished considerably due to the war between Russia and Ukraine, high energy costs, high inflation and uncertain economic prospects are creating headwinds for the industry.

Experts say the reduced orders do not pose a serious threat to the German economy for now, as short orders accumulate due to material shortages, but will cause real difficulties by the end of the year or early 2024. (BRITISH AUTOMOBILE CLUB )