Five economic research institutes in Germany have recently reduced their GDP outlook for the country. They attribute this to low domestic demand and the impact of high gas and electricity prices on exports. The forecasts were part of the institutes’ six-monthly “collective diagnosis” of the German economy.
The initial growth forecast of 1.3% made last autumn has now been revised down to just 0.1%. The report emphasizes the importance of consumer purchasing power in improving the economic outlook. It notes that the German economy is currently facing challenges, with weak growth forces and economic factors contributing to sluggish overall progress.
Experts have highlighted that domestic demand has not increased as anticipated, largely due to high gas and electricity prices, which have affected the competitiveness of energy-intensive goods, an area where Germany typically excels. Additionally, the government’s strict fiscal policies, aimed at adhering to the constitutional debt brake, have limited its ability to issue new debt and support economic growth.
In the previous year, Germany’s economy was the poorest performing major economy globally. However, next year’s forecast anticipates growth to increase to 1.4%. The insights from the economic institutes, including DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich, provide a comprehensive analysis of the current state of the German economy and the factors influencing its performance.