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Institute says German economy is “struggling” and lowers forecasts

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A leading German economic research institute has significantly lowered its economic forecast for the country in the coming year.

The Kiel Institute for the World Economy (IfW) spoke on Wednesday of “headwinds” for the economy from within Germany and abroad.

“The economy in Germany is struggling,” said Stefan Kooths, from the IFW.

The institute expects growth of only 0.1% this year. In the autumn they had assumed that gross domestic product would increase by 1.3% in 2024. The institute has left its forecast for next year virtually unchanged at 1.4%.

In 2023, economic output in Europe’s largest economy fell by 0.3%. The IfW experts say that productivity in Germany has been “treading water.”

Private consumption is less dynamic than expected, and exports have declined despite rising global economic activity. The construction industry is also going through a deep trough.

Although the economy should start to recover in the spring, the overall momentum will not be very strong.

The institute also sees “political uncertainty” continuing to weigh on companies’ investment activity. The German government is currently struggling to finalize a growth package, with Finance Minister Christian Lindner and Economy Minister Robert Habeck each having their own, different ideas.

The German Chamber of Industry and Commerce says that the mood in the country’s economy remains poor. Their Managing Director Martin Wansleben blamed high energy costs, and pointed to “a worsening shortage of skilled labour and geopolitical uncertainties that are weighing on export business.”

There is some good news for consumers, with the experts saying they believe the phase of very high inflation rates since the middle of last year is over. They expect consumer prices to rise by 2.3% this year and by 1.8% next year.

Stefan Kooths, Kiel Institute for the World Economy (IfW Kiel), shows the booklet with the joint forecast of the economic research institutes for spring 2024 at the Federal Press Conference. Kay Nietfeld/dpa

Stefan Kooths, Kiel Institute for the World Economy (IfW Kiel), shows the booklet with the joint forecast of the economic research institutes for spring 2024 at the Federal Press Conference. Kay Nietfeld/dpa

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