However, Boot isn’t surprised. He argues that the reality is not much different from the predictions of the publication of the World Economic Outlook, which already made it clear that the German economy was lagging behind. “I’ve said many times before that we should ban the word ‘recession,'” he says. “We’ve had years and quarters where consumption has soared, spurred on by governments.”
‘We have to realize that we live in a period that cannot be predicted with macroeconomic models’
He therefore does not find it surprising that – after a ten per cent increase in a few years – there is a drop of a few tenths in a year. “In this period, where there are such large fluctuations due to government policy and some shocks that are coming our way, we have to realize that we live in a period that cannot be predicted with macroeconomic models,” continues Boot. “Or stick to the prediction.”
Negative
According to Boot, there is therefore a possibility that Germany will end up with a negative reading for the whole of 2023. “While we knew there was going to be a recession, it could be news that the rate was only a few tenths of a percentage point lower than forecast of the IMF,” he says. “So 2023 as a whole could turn out to be bad.” Then the recession would no longer be defined by two quarters, but by four quarters, according to Boot.
And that’s partly due to government support, according to Boot. He therefore believes that he should be phased out as soon as possible. “Any support causes inflation, which means the central bank has to raise interest rates, which in turn has an unpredictable effect on the economy as a whole,” he concludes. ‘But to operate more predictably, you need to keep expenses down. That means less support, and that’s crucial.’