In view of geopolitical crises worldwide, a weak global economy and savings in the national budget, the HWWI expects the German economy to grow only slowly.
The Hamburg Institute of World Economics (HWWI) assumes that the German economy will be sluggish for a long time. The institute has slightly raised its forecast for the coming year and now expects gross domestic product to decline by 0.3 percent, as the HWWI announced.
“The savings in the state budget expected after the Federal Constitutional Court ruling are likely to slow down the real recovery in the coming year,” says the forecast. For 2024, the HWWI therefore reduced its growth expectations by half a percentage point to 0.5 percent. Only in 2025, if there are no further setbacks, can we expect a slightly more significant increase in economic output of one percent.
The HWWI also expects only a gradual improvement when it comes to inflation. “It will only approach the two percent mark again in 2025,” say the Hamburg economists. Inflation has already fallen significantly from more than 8 percent at the beginning of the year to 3.2 percent recently. “However, the noticeably rising labor costs will slow down the further disinflation process.” Therefore, after an average annual inflation of 6 percent this year, the HWWI expects an average inflation rate of around 2.75 percent for 2024.
According to HWWI, all predictions are subject to the proviso that the Middle East conflict and other geopolitical crises do not escalate further. “Otherwise, we would have to expect a global economic crisis similar to previous phases of this kind, especially given the current relatively weak global economy.”
Source: Stern
