ifo Institute Cuts Growth Forecast for Germany to 0.2%
The ifo Institute has reduced its growth forecast for the current year to 0.2%, down from 0.7% in January and 0.9% in December. But for next year, it raised its growth estimate by 0.2 percentage points to 1.5%. “Consumer restraint, high interest rates and price hikes, the government’s austerity measures, and the weak global economy are currently dampening the economy in Germany and leading to another winter recession. Economic output will accelerate toward the middle of the year as interest rate and price burdens gradually disappear and consumers’ purchasing power increases,” says Timo Wollmershäuser, Head of Forecasts at ifo.
There’s good news from the labor market: despite the slump, the number of employees is set to rise from 45.9 million to 46.1 million, and will reach a record 46.2 million in the coming year. The number of unemployed will rise this year only from 2.6 million to 2.7 million and will fall below 2.6 million again next year. This corresponds first to 5.7%, then 5.9%, and finally 5.6%.
Prices will rise by only 2.3% this year, compared to 5.9% last year. Next year, the figure will be as low as 1.6%.
The public deficit will fall from EUR 87.4 billion to EUR 76 billion this year, and will amount to just EUR 44.6 billion next year. Those figures represent 2.1%, 1.8%, and 1.0% of economic output respectively.
Exports will fall by 1.5% this year, but will grow by 3.4% next year. In parallel, the current account surplus will fall from 6.8% of economic output this year to 6.6% next year.
ifo Economic Forecast Spring 2024: German Economy Paralyzed
Sentiment among companies and households is poor and uncertainty is high. Price-adjusted gross domestic product will increase by only 0.2 percent this year compared to the previous year. Next year, economic output will then increase by 1.5 percent. This means that the growth forecast for the current year has been significantly lowered (by 0.7 percentage points) compared to the ifo Economic Forecast Winter 2023 and slightly raised (by 0.2 percentage points) for 2025. Contrary to expectations, the German economy is in recession in the winter half-year 2023/24. In particular, a recovery in industrial activity will not set in until later
ifo Konjunkturprognose Frühjahr 2024: Deutsche Wirtschaft wie gelähmt
ifo Institut, München, 2024
ifo Schnelldienst digital, 2024, 5, Nr. 2, 01-12
