Light at the end of the tunnel?: Ifo forecast on inflation and growth: when will it be "normal" again?

The Munich-based Ifo Institute expects prices to continue to rise and economic growth to remain weak well into the coming year.

Light at the end of the tunnel?: Ifo forecast on inflation and growth: when will it be "normal" again?

The Munich-based Ifo Institute expects prices to continue to rise and economic growth to remain weak well into the coming year.

"We're going into a winter recession," said the head of economic forecasts, Timo Wollmershäuser, on the occasion of the presentation of the forecast for autumn 2022. Accordingly, the researchers assume that the economy will only grow by 1.6 percent this year percent is growing and inflation remains at a high level of 8.1 percent.

The forecast for the coming year is even bleaker: the institute even predicts a 0.3 percent decline in economic output and a 9.3 percent inflation rate.

According to the study, recovery can be expected in the following year. "We do not expect normalization until 2024, with growth of 1.8 percent and inflation of 2.5 percent," Wollmershäuser continued.

The reason for the high price increases is, among other things, the costs for electricity and gas. "As a result, real household incomes fell sharply and purchasing power fell noticeably. The government's third relief package should counteract this decline somewhat, but by no means offset it," says the study. The researchers do not expect energy prices to fall until spring 2023. For its calculations, the Ifo Institute assumes that there is enough gas available in winter.

But despite all the sadness, there is also good news: The Ifo Institute does not expect any serious effects on the labor market. It expects 50,000 more unemployed in the coming year. The increase is mainly due to people from Ukraine who are only gradually being integrated into the labor market.

Sources: Ifo Institute, DPA news agency

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