Despite Clouds, Germany's Economic Forecast Improves
On Wednesday, the German Council of Economic Experts released a report stating that there has been some improvement in the near future for the biggest economy in Europe. However, this improvement is not very significant.
According to the panel, there are factors that will constrain an increase in economic growth, such as high inflation rates, more difficult access to funding, and low demand from other countries.
Expert Opinions on the Topic
According to the report, the immediate future of the German economy looks a bit better due to the stabilization of energy supply and decreased prices in the wholesale market.
The board anticipated that there would be an increment by 0.2% in the Gross Domestic Product (GDP) in 2023, unlike their previous projection of a decrease by 0.2%. The report compiled by the group of five specialists presented that a growth of 1.3% was expected to occur in 2024.
Nonetheless, as per their statement, the persistent increase in inflation rates is resulting in a decline in buying capacity while also suppressing the interest of consumers in purchasing goods and services.
Meanwhile, the increase in interest rates is causing a deterioration in financing conditions, resulting in a reduction in investment.
The committee predicted that although inflation will decrease throughout the upcoming year, it will still be notably elevated, averaging at around 6.6% in 2023.
According to the specialists, they anticipate a rise in prices around 3% in the upcoming year.
ECB cautions about possible turbulence in the eurozone
The newest predictions from the European Central Bank (ECB) have reduced estimations for inflation while increasing expectations for growth during the current year.
Yet, on Wednesday, ECB Chief Christine Lagarde declared that these projections failed to consider the recent financial disruptions happening in the banking industry, which might further exacerbate the economic hardships across the eurozone.
The compulsory acquisition of Credit Suisse by UBS, a rival Swiss bank, was concerning as it occurred following the failure of three local banks in the United States. People were worried that this could lead to a larger crisis in the banking industry.
Lagarde expressed that the existing tensions have led to additional risks and have made it challenging to evaluate the potential hazards.
The head of the central bank stated that they are still dedicated to controlling inflation, but did not explicitly declare whether they plan to increase or decrease interest rates in the future.
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