Institute lowers forecasts as German economy faces challenges

The Kiel Institute for the World Economy (IfW) has significantly revised its economic forecast for Germany in the upcoming year. According to Stefan Kooths from IfW, the German economy is facing challenges both domestically and internationally, citing “headwinds.”

The institute now expects a meager growth of only 0.1% for this year, a significant decrease from their previous forecast of 1.3% growth in 2024. However, their forecast for next year remains relatively unchanged at 1.4%. Despite a global economic upturn, private consumption in Germany is not as robust as expected, and exports have declined. The construction industry is also facing difficulties. While there may be some signs of recovery in the spring, the overall momentum is expected to be weak.

The IfW sees ongoing “political uncertainty” dampening companies’ investment activities. The German government’s challenges in finalizing a growth package, with differing opinions from Finance Minister Christian Lindner and Economy Minister Robert Habeck, are contributing to this uncertainty. The German Chamber of Industry and Commerce has expressed concerns about the country’s economic outlook, citing high energy costs, a shortage of skilled labor, and geopolitical uncertainties affecting export business.

However, experts predict that inflation rates, which have been high since mid-last year, are expected to decrease, with consumer prices projected to rise by 2.3% this year and 1.8% next year. Overall, while there are challenges ahead for the German economy, there are some positive indicators that suggest it will recover in time.

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By Riley Johnson

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