Bundesbank forecasts recession in German economy

The March report of the German Central Bank (Bundesbank) on the economy has been published.

In the report, it was stated that consumer-related sectors still suffer from persistently high inflation and consequent restrictions on consumption, noting that the German economy will contract in the first quarter of the year.

In the report, it is stated that the Ifo Expectations Index and the GFK Consumer Confidence Index in Germany rose slightly but remained at low levels. But the decline is likely to be less than in the last quarter of 2022.” statements were included.

In the report, which indicated that the inflation rate in the country is expected to decline significantly due to the base effect in March, “the core inflation rate, on the other hand, proves to be extraordinarily persistent. It may increase slightly until the middle of the year.” It was said.

Analysts, on the other hand, see the higher core inflation rate as a sign that companies are passing on higher energy costs to consumers.

DECREASED 0.2 PERCENT IN THE LAST QUARTER

Meanwhile, the German economy contracted 0.2 percent in the last quarter of 2022 compared to the previous quarter due to the energy crisis and record inflation.

Economists expect GDP to fall further in the first quarter of this year as Europe’s largest economy is in recession.

The technical recession is expressed as “two quarters of a GDP contraction”.

Germany experienced its first recession since 2009 in 2020, the first year of the Covid-19 outbreak after 10 years of good economic growth.

In addition, the German government expects 0.2 percent growth in the economy this year.

On the other hand, annual inflation in Germany, which was 8.7 percent in January, remained unchanged in February as expected.