The German economy is only getting out of the valley with difficulty. Due to global risks for the global economy, experts expect only moderate growth in 2024 before things pick up more strongly in 2025.
Until the economy in Germany and around the world gets going again, there is still a hanging game ahead. The industrialized countries organization OECD expects the global economy to grow somewhat weaker next year. After an increase of 2.9 percent this year, an increase of 2.7 percent is expected in 2024, the Organization for Economic Cooperation and Development (OECD) announced in Paris on Wednesday.
An increase of three percent is expected in 2025, as incomes increase and key interest rates are expected to fall. According to the OECD forecast, the economy in Germany will grow by just 0.6 percent in 2024 and by 1.2 percent in 2025, after a slight decline this year.
According to the OECD, falling inflation and rising wages will support incomes and private consumption in Germany. However, high interest rates weighed on housing investment and dampened export demand for capital goods from Germany. However, according to OECD estimates, other investments are gradually increasing. Exports are expected to recover slowly as global demand picks up, the OECD forecast said.
German economy is weakening – uncertainty surrounding Israel
The German economy is currently continuing to weaken, according to the economic barometer published on Wednesday by the German Institute for Economic Research (DIW Berlin) for November. “The German economy is only getting out of the valley with difficulty,” said DIW economic expert Timm Bönke. High interest rates and only gradual increases in wages put a strain on the economy. “The positive contribution of foreign trade has not been able to compensate for this until recently. And now the geopolitical uncertainties have increased considerably due to the war in the Middle East.”
Meanwhile, economic sentiment in the Eurozone has improved somewhat more than expected. The Economic Sentiment Indicator (ESI) rose by 0.3 points to 93.8 points compared to the previous month, the European Commission announced in Brussels on Wednesday.
For the USA, the OECD expects growth of 2.4 percent this year, which will weaken to 1.5 percent in 2024 before picking up slightly again to 1.7 percent in 2025 – under the influence of an expected looser monetary policy.
Hardly any growth in the euro area – many trouble spots worldwide
The euro area was hit comparatively hard by the Russian war of aggression against Ukraine and the energy price shock. The OECD is calculating growth of 0.6 percent for this year, which is expected to rise to 0.9 percent in 2024 and 1.5 percent in 2025. Growth in China is expected to be 5.2 percent this year, slowing to 4.7 percent in 2024 and 4.2 percent in 2025.
According to OECD information, the outlook is overshadowed by risks. These include geopolitical tensions, which have increased again with Hamas’ attack on Israel and the further development of this conflict. This could put growth and economic recovery under pressure. On the other hand, higher consumer spending could boost growth if households spend more of the savings they have built up since the coronavirus pandemic. However, this could also lead to inflation becoming even more entrenched.
Globally, the OECD assumes that growth in emerging economies will be better than in industrialized countries. Growth in Europe will be relatively subdued compared to North America and the major Asian economies. The increase in consumer prices in the leading industrialized and emerging countries (G20 group) will continue to gradually decline. Inflation in most major economies is expected to be back on target by 2025.
Source: Stern
