Inflation in Germany is cooling down.

The German Federal Statistical Office has just announced that German inflation fell to 3.0% in October 2023, the lowest level since August 2021. German consumer prices in September 2023 increased by 4.3% compared to the same period last year.

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

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

Over the past year, the German economy has faced numerous challenges. Germany's Gross Domestic Product (GDP) failed to grow in the second quarter of 2023, following consecutive declines of 0.5% and 0.3% in the preceding two quarters. The European Commission (EC) projects a 0.4% contraction in Germany's economy in 2023, a sharper decline than its 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 surge in energy prices in 2022 halted the recovery from the Covid-19 pandemic. Consumer purchasing power plummeted. The sharp increase in benchmark interest rates significantly impacted economic sectors, particularly the construction industry.

Leading German economic research institutes have forecast that the German economy will contract this year due to a slower-than-expected recovery in industry and private consumption.

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

The slowdown in Europe's largest economy has impacted Eurozone growth. According to the EC, economic growth in the 20-member Eurozone will reach 1.3% in 2024, down from the previously forecast 1.6%. Economic growth in the 27 EU member states next year will be 1.4%.

In addition, the aforementioned agency also lowered its forecast for EU economic growth in 2023 from the previously stated 1% to 0.8%. Weak purchasing power, declining industrial orders, and the impact of the tightest monetary policy in decades continue to weigh on the German economy. Europe's largest economy faces a bleak outlook with many challenges in its post-pandemic recovery process.

Minh Hoa (compiled from Vietnam+, Nhan Dan)

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