German economy expected to contract slightly in 2023 – BDI By Reuters

BERLIN (Reuters) – The German economy is expected to contract by 0.3% this year, Germany’ BDI industry association said on Tuesday, warning that the energy crisis would continue to weigh on industry in Europe’s largest economy.

Mild recessionary trends are expected to predominate at the start of the year, but things should start to improve in the spring, BDI President Siegfried Russwurm said.

The BDI foresees exports of goods and services will increase by 1.0% in real terms this year, lagging behind global trade, for which a 1.5% rise is forecast, Russwurm added.

The BDI president said Germany is falling behind other countries where energy prices are not as high.

“The cost factor of energy has for long not only weakened energy-intensive companies, but has also had a noticeable impact on the entire value chains of industry,” he said, adding that relocations of production could not be ruled out.

He said Germany should diversify trade partners to gain in resilience, although he warned that “resilience isn’t for free”.

European Union trade policy should be pro-active, Russwurm said, adding that a smart industrial policy was needed in response to the U.S. Inflation Reduction Act and that confrontation with Washington should be avoided.