The economy will probably leave with a black eye in 2023

Berlin, Jan 2 – Despite the continued risk of inflation and the massive corona wave in China, Germany is unlikely to face a deep economic slowdown in the new year. The Bundesbank sees it that way, as does business savvy Ulrike Malmendier. The top economist expects two quarters of falling economic output in a row: “But now I am optimistic enough to say: We are not experiencing a mega-recession and certainly not a deindustrialization of Germany,” she added in an interview with “Handelsblatt” on Monday. Bundesbank chief Joachim Nagel also assumes that Germany will get away with a mild downturn.

“And I am convinced that we will get the high inflation under control in the medium term. The Governing Council is very aware of its responsibility,” Nagel said in an interview with the “Journal for the Entire Banking System” (ZfgK). The statistics office Eurostat presented on Friday the data on consumer prices in the euro area in December. Experts polled by Reuters expect inflation to fall to 9.7 percent from 10.1 percent in November.

Although the price increase is no longer in the double-digit percentages, the European Central Bank has not yet sounded the all-clear. After the recent increase of half a percentage point, the deposit rate that financial institutions receive from the central bank for parking excess funds is 2.00 percent. ECB President Christine Lagarde made it clear that interest rates must continue to rise at a pace of 0.50 percentage points for a certain period to dampen inflationary pressures.

According to Malmendier, the high energy prices are a huge burden on the economy: “But companies are also extremely ready to change.” Prices are falling again.” At the same time, she has another concern: “The situation in China worries me,” said the economics professor from the American University of Berkeley, who has been a member of the German Council of Economic Experts. (SVR ) is.

“CHINA PROTECTION CRASH COURSE”

In light of the corona wave in the People’s Republic after the abrupt departure from the strict zero-Covid course and the resulting economic consequences, Germany must prepare an emergency plan: “If the Chinese ports and factories are closed because almost all employees are sick, have dramatic economic consequences,” the economist warned. In their view, supply chains would then collapse again, driving up the prices of raw materials and intermediate products enormously. “I very much hope that the federal government will already develop emergency plans for this matter.” Germany needs a “China Protection Course”.

China’s head of state Xi Jinping has noted that his zero-Covid policy has failed: “Now the pendulum is swinging to the other side: Beijing is apparently pursuing a one-hundred percent Covid policy instead of a zero-Covid policy. But if the relaxation in China goes too far, the number of infections will explode,” warned the member of the expert panel that advises the federal government on economic issues. There are already fears that there could be several million deaths. Because the People’s Republic does not have a working vaccine.

Since there is one in Europe, Malmendier believes it would be good if China would allow and buy it to protect its population: “At the same time, it would be hugely important for the economy, both in China and for us and other trading partners.”

Economy likely to walk away with a black eye in 2023 – “No mega recession”

Source: Reuters

Symbolic photo: installment purchase image on Pixabay

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