Economy: Ifo Institute lowers growth forecast to 0.2 percent

Economy: Ifo Institute lowers growth forecast to 0.2 percent

The experts agree: the German economy will only grow minimally this year. Private consumption and exports will initially barely pick up. Things should get better in the second half of the year.

The Ifo Institute has again lowered its growth forecast for this year. After the decline in gross domestic product last year, Munich economic researchers only expect economic growth of 0.2 percent this year. In December they had expected 0.9 percent and in January 0.7 percent.

“Consumer restraint, high interest rates and price increases, the government’s austerity measures and the weak global economy are currently dampening the economy in Germany and are leading to another winter recession,” said Ifo economics chief Timo Wollmershäuser.

However, with falling interest rates, lower inflation and increasing purchasing power for consumers, economic performance will accelerate in the middle of the year. For the coming year, the Ifo Institute increased its growth forecast by 0.2 points to 1.5 percent.

IfW is also more pessimistic

According to experts at the Kiel Institute for the World Economy (IfW), Germany’s path out of the economic slump is also lengthening. According to the latest forecast, a recovery will only appear after spring. Economic output is likely to shrink in the winter half of the year and will hardly be more than stagnant with an increase of 0.1 percent in 2024 as a whole. The IfW Kiel has thus significantly revised its expectations from the winter forecast downwards by 0.8 percentage points.

Reasons: Private consumption and exports are recovering later or less dynamically, and investments are also extremely weak. For 2025, the IfW Kiel is leaving its forecast unchanged and sees economic output growing at 1.2 percent. The inflation rate is expected to fall to less than 2 percent and the state’s financing deficit to less than 0.8 percent.

Economics Minister Robert Habeck (Greens) recently presented the annual economic report for 2024. The federal government is also only expecting mini-growth of 0.2 percent this year.

Ifo expects record employment

According to the Ifo Institute, prices are expected to rise by 2.3 percent this year and only 1.6 percent next year, after 5.9 percent last year. Economic researchers also expect mostly good news from the labor market. Despite the lull, the number of employees will rise from 45.9 to 46.1 million and reach a record number of 46.2 million next year. However, the number of unemployed will increase from 2.6 to 2.7 million this year; the unemployment rate rose from 5.7 to 5.9 percent. In the coming year, the number of unemployed is expected to fall below 2.6 million.

German exports are expected to decline by 1.5 percent in 2024, but grow by 3.4 percent next year. According to the Ifo forecast, the national deficit will fall from 87.4 to 76 billion euros this year and 44.6 billion euros next year.

Source: Stern

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