Experts Lower Economic Growth Forecast for Germany Amid Ailing Economy

28 Mar, 2024

Experts Lower Economic Growth Forecast for Germany Amid Ailing Economy

Five prominent economic research institutes in Germany have dramatically revised down the country's Gross Domestic Product (GDP) outlook, attributing it to a combination of factors including subdued domestic demand and soaring gas and electricity prices impacting exports.

These institutes recently released their biannual "collective diagnosis" of the German economy, significantly downgrading their previous growth forecast from 1.3% to a mere 0.1%. Emphasizing the critical role of consumer purchasing power in shaping economic prospects, the report paints a bleak picture of Germany's economic health.

Highlighting the current economic challenges, the report describes Germany's economy as "ailing," citing persistent weaknesses and a sluggish overall development exacerbated by both economic and structural factors. Despite expectations of a modest recovery in the coming months, experts caution that the momentum might remain subdued.

One major concern raised is the unexpected stagnation in domestic demand, partly attributed to surging energy prices, which erode the competitiveness of energy-intensive German exports. Additionally, stringent fiscal policies aimed at adhering to constitutional debt limits further constrain economic growth prospects.

Germany's economic woes are further underscored by its dismal performance relative to other major economies last year. However, a modest uptick in growth to 1.4% is anticipated for the coming year.

Compiled jointly by the DIW in Berlin, the IfW in Kiel, the IWH in Halle, the RWI in Essen, and the Ifo in Munich, this diagnosis signals significant challenges ahead for Germany's economy.