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KfW Research

KfW Business Cycle Compass

February 2023 winter forecast

Quasi-stagnation in 2023

An inflation shock, war-induced uncertainty, rising interest rates and a weak global economy are choking off economic growth for the time being. Germany is poised to slip into a moderate technical recession in the winter half of 2022/2023. GDP will just barely stagnate in 2023 and grow by 1.0% in 2024. Inflation will remain at a high 5.8% in 2023 and moderate to 2.1% in 2024. According to our ecological price tag for GDP, greenhouse gas emissions will decline, but the drop will be 6% and 7% below the 2023 and 2024 policy target. Euro area GDP will grow by 0.5% in 2023 and 1.2% in 2024. Inflation there will sit at 5.4% and 1.7%, respectively. Depending on the progression of the Russia-Ukraine war, significant forecast revisions may become necessary.