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News from 2022-08-25 / KfW Research
KfW Business Cycle Compass August 2022
Between stagflation and recession
The economic outlook has deteriorated further. After the catching-up movement in the services sector has been largely completed, economic headwinds now predominate. Both Germany and the euro area can be expected to see negative quarterly growth rates by the winter half-year at the latest. After growth of 1.4% in the current year, we expect Germany’s GDP to contract by 0.3% in 2023. A gas shortage would create a genuine recession in 2023 (-2.5%). Thanks to a strong first half, euro area GDP growth will still be a good 3.0% in 2022 but probably sit at 0.5% in 2023. Inflation will not trend downward until sometime in 2023. Inflation in Germany will stand at 8.4% in all of 2022 before dropping to around 5% in 2023. Euro area inflation rates can be expected to be on a similar level.