Inflation in Germany cools down

Germany's inflation rate fell to 3.0% in October 2023, the lowest since August 2021, the Federal Statistical Office of Germany said on Wednesday. German consumer prices rose 4.3% year-on-year in September 2023.

Core inflation, which excludes volatile food and energy prices, eased to 4.3% in October 2023 from 4.6% in the previous month.

However, Commerzbank economist Ralph Solveen predicts that Germany's core inflation will remain significantly higher than the European Central Bank (ECB) wants next year.

The German economy has been facing many difficulties for more than a year. Germany's gross domestic product (GDP) did not grow in the second quarter of 2023, after consecutive declines of 0.5% and 0.3% in the previous two quarters. The European Commission (EC) expects the German economy to shrink by 0.4% in 2023, a sharper decline than the previous forecast of 0.2%. The Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF) also forecast that Germany will be the only major economy in the Group of Seven (G7) to experience negative growth this year.

The spike in energy prices in 2022 has ended the recovery from the Covid-19 pandemic. People's purchasing power has decreased sharply. The sharp increase in the base interest rate has greatly affected economic sectors, especially the construction industry.

Germany's leading economic research institutes have forecast that the German economy will shrink this year as industry and private consumption recover more slowly than previously forecast.

According to the EC, the German economy has been significantly affected by the decline in industry and exports. Economic indicators show that German output will also fall significantly in the third quarter of this year. However, some positive indicators also suggest that the recession may ease by the end of the year.

The slowdown in Europe's largest economy has hit growth in the eurozone. The 20-nation eurozone will grow by 1.3% in 2024, down from a previous forecast of 1.6%, the EC said. The 27-nation EU will grow by 1.4% next year.

The agency also lowered its forecast for EU economic growth in 2023 from 1% previously to 0.8%. Weak purchasing power, falling industrial orders, and the impact of the most aggressive monetary policy tightening in decades continue to weigh on the German economy. Europe's largest economy faces a bleak outlook with many challenges in the recovery process after the pandemic.

Minh Hoa (reported by Vietnam+, Nhan Dan)

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