The banking association is more pessimistic than others about the development of the German economy: for 2023, the financial institutions expect economic output to decline by around one percent. After a "moderate recession" in winter, however, the situation could stabilize.
From the point of view of the banking association, Germany's economy slides into a "moderate recession" in the winter months. "Overall, we expect a decline in overall economic output in Germany of up to one percent for 2023," said the President of the Association of German Banks, Christian Sewing, to the newspapers of the Funke media group. The banking association is thus significantly more pessimistic than the German Council of Economic Experts, the Federal Government, the EU Commission and the International Monetary Fund, whose estimates were between 0.2 and 0.6 percent of the decline.
"All signs indicate that we will see a moderate recession in Germany in the winter half-year," said Sewing. "But it shouldn't be as severe as was feared a few weeks ago, also due to government support measures such as the gas price brake. The economic situation in Germany should stabilize again from early summer."
After more than ten percent inflation in the past few months, consumer prices will soon stop rising as much. "There is legitimate hope that the inflation rate in Germany will return to the single digits," said the President of the Banking Association. "On average for 2023, we think an inflation rate of around seven percent is likely. We will only see significantly lower inflation rates in 2024. However, the rate could then still be just under four percent, also because the energy price brakes have expired."
The banking association also expects a tougher monetary policy. "The European Central Bank will continue to raise the key interest rate in 2023 - again by 50 basis points in early February and mid-March." And that's not all, according to Sewing: "The deposit rate for banks with the European central bank, which is currently two percent, could rise to 3.25 percent. And after the last ECB meeting, it should be clear that that too doesn't have to be the end of the line."
