A new forecast expects the overall German economic output to contract this year, mainly due to a slower-than-expected recovery in the industry and private consumption.

Germany is struggling to get back to the role of the economic engine of the EU.

According to five economic institutes who provide their common forecast twice a year, the country’s GDP is expected to decline by 0.6 in 2023, as rising interest rates take their toll on the economy and high inflation depresses consumption.

The previous forecast made in spring 2023, expected stagnation.

"The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected in spring," says Oliver Holtemöller, Vice President and Head of the Macroeconomics Department at the Halle Institute for Economic Research (IWH).

Germany has been in a downturn for more than a year, mainly due to the sharp rise in energy prices in 2022.