The German Bundesbank is leading into a sharper recession in Germany, down 0.5%.

Europe will have difficulty recovering from the energy shock exacerbated by the war in Ukraine and overcoming its economy’s dependence on Russia. Germany’s central bank, the Bundesbank, now expects a sharper contraction in Europe’s largest economy by volume, which next year will contract by 0.5% and which will then continue to be affected by inflation, which will, on average, stand at 7.2% (last month it rose to 10%). , much higher than the 6.8% recorded in the annual average CPI for Spain).

“Compared to the June forecast, the 2023 GDP exchange rate has been revised significantly downward,” said Bundesbank President Joachim Nagel, who took office earlier this year. In his view, the deterioration of energy supply, the low withdrawal of external demand in the context of uncertainty (a key variable for a country whose economy is largely dependent on exports) and the high financing costs with which the tightening of monetary policy by the European Central Bank explain these more pessimistic prospects. This Thursday, the entity led by Christine Lagarde made it clear It will go ahead with raising interest rates next year to control inflation run away

From the views that the entity has released to the public, this can also be inferred The recovery of the German economy will be slow, because it expects GDP to grow 1.7% in 2024 and to slow somewhat again in 2025 to advance to 1.4%. Previously, the Bundesbank had expected Germany to end this year with growth of 1.8%. A sharp increase in the price of the shopping basket will have a full impact on household consumption, so this activity will remain in the negative zone until the middle of next year.

Inflation will remain high in the next three years

The increase in financing costs will affect investment by companies and in construction, while the state will also act on the brakes with regard to public spending – especially in what it has been implementing to address the consequences of the Covid epidemic. If the recovery is slow, A return to inflation will be more likely. Bundesbank puts annual CPI rate at 8.6% on average this year; It revised it to just 7.2% next year and will still maintain it at 4.1% in 2024. Looking ahead to 2025, Germany will have managed to put average inflation at 2.8%, which is still above the stability target sought by the Bank. European Central.