The International Monetary Fund (IMF) predicts that most of the world’s major economies will see growth, except for Germany, which is now forecast to do worse than in the last report from April 2023.
According to the latest July estimates, real gross domestic product (GDP) could shrink in Germany by 0.3 percent this year. In April, the IMF had predicted a decline in economic output of 0.1 percent for 2023. This makes Germany the only country on the chart where the forecast assumes negative growth and where the IMF has not improved on its spring forecast.
According to the IMF, Germany’s contraction in economic output compared to the previous year mostly comes down to two factors: namely that, as an export nation, Germany is suffering more from the generally weak world trade than other countries, while at the same time its industry is also struggling with high energy prices.
Although global economic forecasts have improved slightly, the world economy as a whole is still suffering from the increase in key interest rates by central banks to combat inflation. IMF analysts expect global headline inflation to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and to 5.2 percent in 2024. Underlying core inflation is expected to decline more slowly and inflation forecasts for 2024 have been revised upwards.
However, it is important to stress here that this forecast is anything but certain. For instance, inflation could increase still further if additional shocks occur, such as extreme weather events or an intensification of the war in Ukraine, which could trigger a more restrictive monetary policy.
Text written by: Matthias Jansen
Translated by: Anna Fleck