The main German economic institutes significantly lowered their gross domestic product (GDP) growth forecast for 2024 on Wednesday, expected at 0.1%, with the leading European economy suffering from a
“cyclical”
and
“structural”
crisis .
This autumn, the institutes still forecast growth of 1.3% for Germany this year, but are now more pessimistic due to the slow recovery in consumption.
Their new forecast comes close to the German government's projections, which forecast growth of 0.2% this year.
In question,
“cyclical and structural factors”
which overlap, explaining
“the slowness of overall economic development”
, declared Stefan Kooths, director of economic research at the Kiel Institute.
“Although a recovery is likely from the spring, the overall momentum will not be very strong
,” he added.
In 2023, the German economy fell into the red with a fall of 0.3% in its GDP, weighed down by the crisis in the industrial sector.
“During the year, private consumption will become the most important driver of the economy
,” explained the five institutes (DIW, IFO, IFW, IWH, RWI) in a joint press release.
However, this
“recovered later and less dynamically than [the group of institutes] had predicted”
, they added.
For the year 2025, the institutes' growth forecasts are practically unchanged, at 1.4% (compared to 1.5% previously).
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Slowing inflation
Inflation, which reached a record level of more than 8% in the fall of 2022, will confirm the current slowdown, to 2.3% in 2024 and 1.8% in 2025 according to them.
Real wages should increase and support the recovery in consumption but without purchasing power returning to the level before the surge in inflation before the second quarter of 2025, following the outbreak of the war in Ukraine in February. 2022 Germany, long the driving force of the European economy, faces a crisis in its industrial sector, the pillar of its growth, caused by rising energy prices and a drop in global demand.
This delicate situation is causing heated debates between the three parties in Chancellor Olaf Scholz's coalition government.
The leader of the liberal FDP, Finance Minister Christian Lindner, refuses the reform favored by Robert Habeck, environmentalist Minister of the Economy, who calls for adjusting the constitutional budgetary rules to invest and support industry.
Institute experts recommend a
“moderate”
reform of the constitutional debt brake rule, which would allow more debt-financed investment.