129
Germany The economy is projected to grow by 1.8% in 2022, contract by 0.3% in 2023 and recover by 1.5% in 2024. Uncertainty is high amidst strong energy price volatility. High inflation is reducing real incomes and savings, damping private consumption. Despite weakening external demand, export growth will recover through 2023 due to easing supply chain bottlenecks and a record-high order backlog. If energy saving requirements are not met during the winter, gas rationing would imply severe production disruptions. The fiscal deficit will widen in 2023, before contracting in 2024. It is crucial that energy support measures establish strong incentives for gas savings and target vulnerable households. Corporate support measures should address liquidity concerns and not impede necessary structural change. Improving planning and approval processes and capacity, particularly at the municipal level, would accelerate the energy transition and digitalisation. Skilled labour shortages should be addressed by raising the labour supply of women, elderly and low-skilled workers, improving training and adult learning, and facilitating the recognition of the qualifications of migrants and refugees. Uncertainty and high inflation exert a drag on growth Following Russia’s invasion of Ukraine, GDP growth slowed to 0.1% (seasonally adjusted quarterly rate) in the second quarter of 2022 and 0.3% in the third quarter. High inflation and plummeting consumer confidence have limited the rebound of private consumption that had been imparted by the lifting of pandemic containment measures and high excess savings. Heightened uncertainty, high energy prices and material shortages have hurt manufacturing and construction as well as investment. Business confidence plunged in September, but stabilised in October. High order backlogs and easing supply chain bottlenecks are supporting exports. Annual consumer price inflation rose to 10.9% in September with the phase-out of fuel and public transport subsidies and continued to rise to 11.6% in October. Producer prices rose by 45.8% over the year to September. Household inflation expectations for one, five and ten years ahead averaged 8.2%, 6% and 5.5%, respectively, in September. The labour market remains robust amid intensifying labour shortages, but annual negotiated pay rose only by 2.9% in the second quarter of 2022, resulting in a real wage decrease of 4.4%.
Germany 1
Source: Federal Statistical Office; ifo business surveys; and GfK. StatLink 2 https://stat.link/vl5bjr OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022