The ifo on Monday cut the growth estimate for Germany from 2.5% to 1.6% for 2022 and from an advance of 3.7% to a contraction of 0.3% for 2023, pointing to a normalization recently in 2024.

“We are headed for a winter recession,” Timo Wollmershäuser, head of economic forecasting at the German economic institute Ifo, said in a statement released Monday.

Wollmershäuser added that “Russia’s gas supply cuts in the summer and the consequent drastic rise in prices are ruining the economic recovery after the new coronavirus pandemic.”

Only in 2024 do we expect normalization with growth of 1.8% and inflation of 2.5%”, he said.

Regarding inflation, the institute expects it to reach an average of 8.1% this year and that in 2023 it will increase to 9.3%.

Thus, compared to June, the ifo significantly lowers the growth forecast for 2023 by four percentage points and significantly increases the inflation forecast by six percentage points.

These are unusually large changes in such a short period of time,” said Wollmershäuser.

Energy providers significantly adjust their electricity and gas prices to the high acquisition costs, especially at the beginning of 2023, which will even increase the inflation rate to around 11% in the first quarter.

As a result, real household income will fall sharply and purchasing power will drop significantly.

The third support package announced by the German government may help offset this drop to some extent, but it will be far from offsetting it.

The loss in purchasing power, measured by the decline in real ‘per capita’ wages this year and next by around 3% respectively, is greater than at any time since the start of current national accounts in 1970,” said Wollmershäuser.

Over the course of the next year, price increases will gradually weaken.

ifo assumes that there will be enough gas available in winter so that energy prices do not rise further and fall again from spring 2023 at the latest.

On the other hand, the institute does not expect a serious impact on the labor market and job growth will only slow temporarily.

EITHER increase in the number of unemployed by around 50,000 next year it will be mainly due to the sharp increase in the number of Ukrainian citizens who arrived in the country in the summer of 2022, who will only gradually be integrated into the labor market.

Greece raises economic growth forecast to 5.3% in 2022

Greece raised its 2022 growth forecast to 5.3% from 3.1% on Monday, mainly due to an “impressive increase” in investment and exports, Greek Finance Minister Khristos Staikuras told reporters.

In absolute terms, the Greek Gross Domestic Product (GDP) will exceed 200 billion euros this year.

The minister pointed out that the The country’s economic credibility is on the rise after Greece’s exit from the reinforced surveillance by the European institutions on August 20.and stressed that “the goal of reaching investment grade is close.”

The Deputy Minister of Finance, Theodoros Skilakakis, highlighted that the objective of a primary deficit of 2% of GDP by 2022 is maintained, as well as the forecast that public debt will fall to levels below those of 2019, when it stood at 180 .7% of GDP.