German economic institutes reduce 2024 growth forecast to 0.1%

A group of leading economic think tanks released their six-monthly “collective diagnosis” of the German economy for early 2024 on Wednesday. The report, titled “German economy ailing — reforming the debt brake is no cure-all,” revised Germany’s 2024 growth forecast down from 1.2% to near-stagnation, at 0.1% for the year.

The report highlighted that Germany’s economy is currently struggling, with a phase of economic weakness persisting and growth forces dwindling. Both economic and structural factors are overlapping, contributing to the sluggish overall economic development. However, the summary of the report predicted that while the situation may start to improve soon, the overall dynamic will not be “all that great.”

The report emphasized that consumers and their recovering purchasing power, as inflation sinks and wages rise in many sectors, will be crucial for the economic recovery. The German government, in collaboration with leading economic institutes including the DIW in Berlin, the IfW in Kiel, the IWH in Halle, the RWI in Essen, and Ifo in Munich, also revised its economic forecasts downwards. There is a warning of the likelihood of entering a technical recession by the end of the first quarter of 2024, following a 0.3% year-on-year contraction in German GDP in the last quarter of 2023.

One contributing factor to the economic challenges in recent months has been frequent strikes impacting rail network and air travel in Germany. These strikes have led to canceled flights and trains, with knock-on effects for other sectors. However, there was a major labor dispute between national rail operator Deutsche Bahn and GDL train drivers’ union resolved earlier this week with a breakthrough deal after months of negotiations.

Despite these challenges facing Germany’s economy today

By Aiden Johnson

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