BERLIN (Reuters) -The German economy will contract more than previously expected this year as sticky inflation takes its toll on private consumption, the Ifo Institute said on Wednesday while presenting its forecasts.
"The German economy is only very slowly working its way out of the recession," Ifo's head of economic forecasts, Timo Wollmershaeuser, said.
German gross domestic product is expected to fall by 0.4% this year, more than the 0.1% forecast by the Ifo Institute in March.
"When we compare Germany with our main trading partners, these countries are at least expected to post growth," Wollmershaeuser said. Ifo forecasts eurozone GDP will expand by 0.6% this year and the U.S. by 0.9%.
The economic institute has also cut the forecasts for Germany in 2024 to 1.5% GDP growth, down from the 1.7% it previously expected.
Inflation is forecast to ease slowly from 6.9% in 2022 to 5.8% this year, down to 2.1% in 2024. Regarding core inflation, the Ifo Institute forecasts it will increase to 6% this year from 4.9% in the previous year, before falling to 3% in 2024.
Due to inflation, private consumption will fall by 1.7% this year, the economic institute forecasts. It will not rise again until 2024, when it is expected to post a 2.2% increase.
The number of unemployed will rise slightly in 2023, but the unemployment rate will remain unchanged from the previous year at 5.3% this year, rising to 5.5% in 2024.
New government borrowing will fall from 106 billion euros ($115 billion) in 2022 to 69 billion this year and 27 billion next year, according to Ifo's estimates.
($1 = 0.9162 euros)