German Finance Minister Christian Lindner said on Tuesday that he believes the country will experience a mild recession in 2023, but he feels positive about his country’s economic outlook.
“We’re still dealing with high uncertainty, but I think the economic outlook is improving,” Lindner told CNBC’s Geoff Cutmore in an interview in Davos at World Economic Forum.
He added that he feels more positive about 2023 and 2024 than he did just a few months ago.
“There is an opportunity to see a faster economic recovery and a faster-than-expected fall in the inflation rate,” Lindner said.
Earlier this month, the country’s inflation index for December came back lower than expected, falling to 9.6%.
Lindner said he expects a “very mild” recession, but also believes the German economy is resilient. This includes broader industry as well as mid-sized companies, he explains.
“The German economy has been able to reduce gas consumption by more than 20% without reducing output, so this shows that we have resilience,” the finance minister said, referring to the pressure that European economies have faced since the outbreak of the Ukraine crisis.
He said the German government is now focused on “enhancing competitiveness” of the economy.
IRA’s concerns
Lindner also referred to the US administration’s Inflation Reduction Act, which he said he had some concerns about.
“We need trade diplomacy, not any kind of trade war or competition between the US and the European Union, which can afford to pay more subsidies. There will be two losers, the US. and the European Union,” Mr. Lindner said.
While he said he understood the US government’s focus areas for the green transition and its relationship with China, he also believes that the “negative side effects on the Union Europe and our bilateral trading relationship” must be minimized.
