Outlook for German economy improves, but inflation remains a drag, government advisers say

The outlook for the German economy has improved slightly compared with last autumn, but high inflation continues to hold back growth. The German Council of Economic Experts said this in its report published today. It forecast that Germany’s gross domestic product (GDP) will grow by 0.2 percent this year, in line with the German government’s January forecast. The council expects growth to accelerate to 1.3 percent next year.

„The loss of purchasing power caused by inflation, tighter financial conditions and the slow recovery in foreign demand are preventing a stronger upturn in (the German economy) this year and next,“ said the council’s chair, Monika Schnitzer.

Germany is Europe’s largest economy and the Czech Republic’s biggest trading partner.

According to the council, inflation peaked last autumn, but remains significantly higher than in previous years and is likely to fall very slowly. The council also warned, according to Reuters, that the current rise in risks on financial markets is complicating central banks’ efforts to fight inflation. This could lead to inflation remaining high for longer, or even rising again.