The economy in Germany is stronger than expected in the first quarter of 2024. The Federal Statistical Office comes to this conclusion.
After the slump in 2023, the German economy picked up pace somewhat at the beginning of the current year. The gross domestic product (GDP) rose by 0.2 percent in the first quarter of 2024 compared to the previous quarter, as the Federal Statistical Office announced on Tuesday based on an initial estimate.
According to economists, Europe’s largest economy may now be over the worst. In its most recent forecast, the federal government saw increasing signs of a trend reversal. However, a strong economic recovery is not expected for the time being.
At the end of 2023, economic output had fallen by 0.5 percent compared to the previous quarter, adjusted for price, calendar and seasonally, according to revised figures. In 2023 as a whole, Germany slipped into a slight recession with a decline in gross domestic product, which according to the latest calculations amounted to minus 0.2 percent after adjusting for prices. The export-oriented German economy felt the effects of the global economic slowdown as well as the temporarily high energy prices and the rapidly rising interest rates. There is also a lack of skilled workers and companies complain about too much bureaucracy.
Signs of economic activity in Germany
According to the Federal Office, the mini-growth in the first three months was driven by increasing construction investments and exports. Private consumer spending, however, fell.
“Skimplation”
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Economists are now seeing signs of a change for the better. The mood in the German economy continued to brighten in April. The Ifo business climate index, for which around 9,000 companies are regularly surveyed, rose for the third month in a row.
Government expects slight economic growth
The federal government slightly raised its economic forecast and now expects 0.3 percent growth in the current year. The government had previously assumed an increase of 0.2 percent. Growth of 0.3 percent is of course “not something we can be satisfied with,” admitted Federal Economics Minister Robert Habeck (Greens). But there are a number of positive developments. For example, inflation has fallen faster than expected.
On Monday evening, at an event in Kassel, Habeck spoke out in favor of a “short-term” and “massive” tax relief program for the economy. In order to finance this, the Green politician called for a reform of the debt brake at a readers’ meeting of the “Hessisch/Niedersächsische Allgemeine” (HNA). More flexibility would allow more to be done for the construction industry and for more investments by companies. However, Habeck admitted that there is currently no political majority in favor of reforming the debt brake.
Mini-growth forecast
According to the latest forecasts, leading economic research institutes only expect Germany to achieve mini-growth of 0.1 percent in 2024 as a whole. According to their assessment, a recovery will begin in the spring, but the momentum will not be too great.
Source: Stern
