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German economic institutes cut 2024 growth forecast to 0.1%

A combined report from leading economic think tanks in Germany has revised 2024 growth forecasts from 1.2% down to 0.1%. The country is also expected to dip into a technical recession after the first quarter.

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 2024 growth forecast down from 1.2% to near-stagnation, at 0.1% for the year. 

“Germany’s economy is struggling. A phase of economic weakness that has persisted until recently is accompanied by dwindling growth forces. Both economic and structural factors are therefore overlapping in the sluggish overall economic development,” the report’s summary said.

It predicted that the situation would start to improve soon, but also warned that this dynamic would not be “all that great” overall. 

The report said that consumers and their recovering purchasing power, as inflation slows and as wages rise in many sectors, would be “the most important fuel for the economic recovery.” 

Government also forecasting difficult 2024, but a return to slight growth

The so-called “collective diagnosis” is compiled in collaboration between a series of leading German economic institutes: 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 a few weeks ago, 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, with two consecutive quarters of negative growth deemed by most to constitute a technical recession.

One additional contributing factor in recent months has been the frequent strikes impacting both the rail network and air travel in Germany, which can have knock-on downsides for other sectors impacted by canceled planes and trains. 

However, one of the larger labor disputes, between national rail operator Deutsche Bahn and the GDL train drivers’ union, was solved earlier this week with a breakthrough deal after months of acrimonious negotiations. 

Source: Dw

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