2024-09-27 02:07:23
The German economy is stuck in an economic downturn. According to the forecast, no boom is expected in the next two years either.
The German economy is stalling. Leading economic research institutes are lowering their economic forecasts. They expect the gross domestic product in Germany to decline by 0.1 percent this year. Only a weak recovery is expected for the next two years, with increases of 0.8 percent in 2025 and 1.3 percent in 2026.
In the spring, the institutes had predicted a minimal increase of 0.1 percent for 2024 and expected growth of 1.4 percent for 2025.
In addition to the economic weakness, structural change is also putting a strain on the German economy, said Geraldine Dany-Knedlik, economic expert at the German Institute for Economic Research, according to the announcement. “Decarbonization, digitalization, demographic change and probably also greater competition from companies from China have triggered structural adjustment processes that are dampening the growth prospects of the German economy.”
Structural change and the economic downturn are particularly affecting the manufacturing sector, according to the forecast. The competitiveness of capital goods manufacturers and energy-intensive industries is suffering from increased energy costs and increasing competition from high-quality industrial goods from China, which are displacing German exports on world markets.
According to the forecast, the continued high level of interest rates as well as the high level of economic and geopolitical uncertainty are putting a strain on companies’ investment activities. “Private households are increasingly saving their income instead of spending money on new housing or consumer goods.” The savings rate was recently 11.3 percent, above its long-term level.
The institutes cite a “further significant increase in political uncertainty” as a risk. Although the federal government has approved a draft budget for 2025, there remains concern about the government coalition’s possible inability to act, it is said with regard to many disputes in the traffic light coalition. The “growth initiative” does offer some good approaches. However, these have not yet been implemented. The initiative does not help make economic policy clearer and more predictable for households and companies.