Economic forecast
DIW lowers expectations for economic growth
Berlin economic researchers view the development of the German export industry with concern. High energy costs and growing competition are putting pressure on them. Are there still threats of trade conflicts?
The German Institute for Economic Research (DIW) expects the economy to shrink by 0.2 percent this year and slight growth of 0.2 percent next year. The Berlin economic researchers are once again revising their expectations downwards.
“The German economy is dragging itself through stagnation, and a sustainable recovery is becoming more and more distant, even in view of structural challenges,” write the Berlin economic researchers. The mix of economic slowdown and structural problems is particularly affecting the German export industry, says DIW economics head Geraldine Dany-Knedlik. Exports are expected to fall further in 2025. The US boom remains a central driver of global growth. But in addition to high energy and material costs and growing competition from China, there is now a threat of even higher US tariffs.
Unemployment is rising
The stumbling of German industry is increasingly affecting industry-related services and the labor market. The unemployment rate is expected to rise from 6.0 to 6.1 percent. Private consumption only supports growth to a limited extent, and consumers’ worries about jobs dampen their purchasing mood. However, the DIW continues to assume that private consumption will pick up again in the coming year thanks to rising incomes and falling inflation.
However, according to DIW President Marcel Fratzscher, an intensification of geopolitical tensions and trade conflicts would fuel inflation and increase interest rates. This would have profound consequences for growth, investment and consumption.
Half a year without a federal government able to act will further weaken the economy, says Fratzscher. At least the urgently needed reforms and financial relief must be addressed during this legislative period.
dpa
Source: Stern
