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

German Economy Faces Reforms, Weakness, and Stagnation in Early 2024, DIW Report Suggests

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

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. However, 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. This 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.

In addition to this report, 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 these challenges has been frequent strikes impacting rail network and air travel in Germany over several months leading to canceled flights and trains which caused inconvenience to passengers and had an impact on trade and commerce. However, after months of negotiations with Deutsche Bahn train drivers’ union earlier this week reached an agreement making it possible for trains to run without further interruptions. Despite these challenges; according to this new report German economy is forecasted to return to slight growth in near future

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