Deutsche Bundesbank lowers Germany’s GDP growth forecast for year

Deutsche Bundesbank published an updated forecast for the year on June 10, 2022.

The bank’s forecast for German GDP has worsened. Moreover, bigger annual inflation is expected to occur. 

According to the new forecast, GDP will grow by only 1.9 per cent in 2022 compared to 4.2 per cent, which the bank predicted in December 2021.

The bank also downgraded its 2023 GDP growth forecast from 3.2 per cent to 2.4 per cent.

According to the bank’s analysts, two opposing trends, namely, the revival of the economy after the abolition of the anti-COVID measures that were valid in the previous two years, and the negative impact of the military conflict in Ukraine and rising prices, especially for energy resources, will affect the country's economy.

As for inflation, the bank expects prices to rise by 7.1 per cent year-on-year compared to 3.6 per cent predicted in December 2021. Inflation will reach 4.5 per cent in 2023 compared to 2.2 per cent in the previous forecast.

“Inflation will be even stronger this year than in the early 1980s. The price pressure has greatly increased recently, which is not fully outlined in this forecast,” Head of the bank Joachim Nagel noted.

Nagel added that if this trend continues, inflation for the year may greatly exceed the currently projected seven per cent.