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German economic institutes reduce 2024 growth forecast to 0.1% – DW – 03/27/2024

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Mar 27, 2024

A group of leading economic think tanks released their six-monthly “collective diagnosis” of the German economy for early 2024 on Wednesday. Titled “German economy ailing — reforming the debt brake is no cure-all,” the report revised the growth forecast down from 1.2% to near-stagnation, at 0.1% for the year. The summary of the report stated that Germany’s economy is struggling due to a phase of economic weakness accompanied by dwindling growth forces. Both economic and structural factors are contributing to the sluggish overall economic development. The report predicted that the situation would start to improve soon, but overall, the dynamic would not be “all that great.”

The report highlighted that consumers and their recovering purchasing power, as inflation sinks and wages rise in many sectors, would be the most important fuel for the economic recovery. The collective diagnosis is a collaboration between leading German economic institutes including the DIW in Berlin, the IfW in Kiel, the IWH in Halle, the RWI in Essen, and Ifo in Munich. The German government also revised its economic forecasts downwards, warning of the likelihood of entering a technical recession by the end of the first quarter of 2024. German GDP contracted by 0.3% year-on-year in the last quarter of 2023, meeting the criteria for a technical recession with two consecutive quarters of negative growth.

One contributing factor to the economic challenges has been the frequent strikes impacting the rail network and air travel in Germany, leading to canceled flights and trains. However, a resolution was reached in one of the major labor disputes between Deutsche Bahn and the GDL train drivers’ union earlier this week after months of negotiations. Despite these challenges, the report indicates that the German economy is forecasted to return to slight growth in the near future.

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