Energy crisis, inflationary shock, uncertainty: the Russian war of aggression against Ukraine also has significant consequences for consumers and companies in this country.
According to many economists, the German economy will shrink in 2023, and inflation is likely to remain high for the time being. Nevertheless, the picture is no longer as bleak as it was months ago - also because the state is taking countermeasures with price brakes and relief packages worth billions.
Economy: Despite the headwind, the German economy is doing better than initially thought. In the third quarter, the gross domestic product (GDP) surprisingly grew by 0.4 percent compared to the previous quarter. Concerns about a severe economic slump in the coming year are fading. "The general economic conditions have eased significantly," says Commerzbank chief economist Jörg Krämer.
Slight decline in GDP forecast
Many economists are now assuming a comparatively mild recession in the coming year. They expect GDP to fall by less than one percent in 2023 as a whole. For comparison: In the Corona crisis year 2020, economic output in Europe's largest economy had shrunk by more than four percent. The Institute for the World Economy (IfW) even expects slight economic growth of 0.3 percent for 2023 - also thanks to government energy price brakes.
Inflation: Inflation rates of around 10 percent are a burden for consumers and companies in Germany. For the time being, the Bundesbank gives people little hope of significantly falling prices. "Inflation is high and will only drop gradually," said Bundesbank President Joachim Nagel. For 2023, the Bundesbank expects inflation to fall from an average of 8.6 percent in 2022 to 7.2 percent - as measured by the harmonized index of consumer prices (HICP), which is decisive for monetary policy in the euro area.
Many economists are expecting things to relax, especially in the spring - for example the RWI-Leibniz Institute for Economic Research: "Then, after the heating period, the acute phase of the energy crisis for households should be over and consumer prices will also fall."
Labor market: According to estimates by the Federal Employment Agency (BA), the situation on the German labor market has been stable so far. The willingness of companies to hire is still high despite a slight weakening. Many industries are desperately looking for skilled workers and try to keep existing staff even in economically uncertain times, for example through short-time work.
Slight increase in unemployment rate expected
The Munich Ifo Institute expects that short-time work will temporarily increase in the winter half-year and that the increase in employment will come to a standstill. According to the forecast, the unemployment rate will increase slightly from 5.3 percent in 2022 to 5.5 percent in 2023.
Insolvencies: A wave of bankruptcies cannot yet be identified in Germany based on officially recorded figures extrapolated by experts. For the first time since the economic crisis of 2009, however, the number of company bankruptcies has increased. According to estimates by the credit agency Creditreform, around 14,700 companies will have gone to insolvency court by the end of 2022. That would be about four percent more than in 2021.
"Persistent inflation, rising interest rates and energy costs, and an increasingly tough competitive situation are taking their toll on many companies," said Creditreform expert Patrik-Ludwig Hantzsch. Like many other experts, Creditreform also expects a further increase in corporate bankruptcies in the new year.
Central banks: The major central banks around the world are fighting the increased inflation by raising interest rates. The European Central Bank (ECB) raised interest rates in the euro area four times in a row in the second half of 2022. The key interest rate at which banks can borrow fresh money from the ECB is now 2.5 percent, the highest level since December 2008. There are signs of further increases.
"We're not letting up. We have to go a long way," said ECB President Christine Lagarde recently. Rising interest rates are good news for savers. In the interest rate slump, call money and the like hardly yielded anything, and some bank customers even had to pay penalty interest. For borrowers, on the other hand, it tends to be more expensive.