FRANKFURT - The Bundesbank has provided an economic forecast indicating a slight contraction in Germany's GDP by the end of 2023, followed by a modest recovery in the subsequent years. The central bank anticipates a 0.1% decline in GDP for the current year, with prospects of growth picking up to approximately 0.4% in 2024 and then accelerating to about 1% by the mid-decade.The expected rebound in economic activity is attributed to stronger export performance and an increase in household spending, supported by stable employment conditions and rising wages. This comes despite facing headwinds from reduced global demand impacting the heavy industry sector.In related developments, Germany's unemployment rate has surged to its highest point since late last year. However, there is a silver lining as inflation rates, which currently stand at 6%, are projected to decrease to around 2.5% within the next two to three years. This anticipated drop in inflation is being closely watched by the European Central Bank (ECB), which has maintained interest rates at 4%. President Christine Lagarde leads the ECB with a strategy that reflects a careful approach towards inflation, aiming to achieve alignment with the ECB's long-term targets.The ECB's vigilance extends to keeping an eye on labor costs and business earnings as they could be potential contributors to future inflationary pressures. In response to financial challenges, German policymakers have reached a consensus on reinstating budgetary controls. These fiscal measures are expected to contribute to a more stable economic environment moving forward.
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