German economic institutes reduce 2024 growth forecast to 0.1%

Sluggish Growth: Germany’s Economic Crisis and the Role of Consumers in Recovery”.

The German economy is facing a tough time, according to a report released by leading economic think tanks on Wednesday. Titled “German economy struggling — fixing the debt brake won’t cure all,” the report forecasts growth for 2024 at just 0.1%, down from an earlier prediction of 1.2%. The authors emphasize that Germany’s current economic situation is complex and multifaceted, with both economic and structural factors contributing to sluggish growth.

The report highlights that consumers will play a crucial role in driving the economic recovery, as inflation falls and wages rise in many sectors. The German government, along with leading economic institutes including the DIW in Berlin, the IfW in Kiel, the IWH in Halle, the RWI in Essen, and Ifo in Munich, has revised its own economic forecasts downwards as well. There is a warning that Germany may enter a technical recession by the end of the first quarter of 2024 if there is another contraction of -0.3% year-on-year GDP in the last quarter of 2023.

One factor contributing to recent economic challenges has been frequent strikes affecting rail and air travel in Germany. These strikes have led to cancellations and delays for passengers, with knock-on effects on other sectors as well. However, a major labor dispute between national rail operator Deutsche Bahn and train drivers’ union GDL was resolved earlier this week with a breakthrough deal after months of negotiations. Despite these challenges, there are hopes for slight growth as consumers regain their purchasing power and reforms are implemented to address economic weaknesses.

Overall, the report suggests that while there are some positive signs for Germany’s economy moving forward, it will require sustained efforts from policymakers and businesses alike to overcome current challenges and build a more resilient future for all stakeholders involved.

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