German recession will be sharper than expected: Ifo

People with protective face masks walk at Kurfurstendamm shopping boulevard, amid the coronavirus disease (COVID-19) outbreak in Berlin, Germany, December 5, 2020. REUTERS/Fabrizio Bensch/File Photo

BERLIN – The German economy will contract more than previously expected this year as sticky inflation takes its toll on private consumption, the Ifo Institute said on Wednesday while presenting its forecasts.

German gross domestic product is expected to fall by 0.4 percent this year, more than the 0.1 percent forecast by the Ifo Institute in March.

“The German economy is only very slowly working its way out of the recession,” Ifo’s head of economic forecasts Timo Wollmershaeuser said.

The economic institute has also cut the forecasts for 2024 to 1.5 percent GDP growth, down from 1.7 percent previously expected.

Inflation is forecast to ease slowly from 6.9 percent in 2022 to 5.8 percent this year, down to 2.1 percent in 2024.

Due to inflation, private consumption will fall by 1.7 percent this year, the economic institute forecasts. It will not rise again until 2024, when it is expected to post a 2.2- percent increase.

The number of unemployed will rise slightly in 2023, but the unemployment rate will remain unchanged from the previous year at 5.3 percent this year, rising to 5.5 percent in 2024.

New government borrowing will fall from 106 billion euros ($115 billion) in 2022 to 69 billion this year and 27 billion next year, according to Ifo’s estimates.

($1 = 0.9162 euros)