Germany’s government forecasts the economy will grow 0.2% this year, far less than the previous estimate of 1.3%, as weak global demand, geopolitical uncertainty and persistently high inflation expectations of a quick recovery diminish.
The revised forecast was approved by the cabinet on Wednesday as part of the government’s annual economic report, according to government sources.
Europe’s largest economy shrank 0.3% in 2023 and is expected to enter another technical recession in the first quarter of this year.
“The German economy remains in difficult waters at the start of the year,†said a draft report seen by Reuters.
He listed high inflation and the consequent loss of purchasing power among the challenges, as well as geopolitical crises and increases in interest rates.
German economic advisers plan to follow the federal government’s lead and lower their forecast for economic growth in 2024, adviser Ulrike Malmendier told Reuters in an interview.
“I think we will definitely go in the same direction… that’s what our numbers are indicating,†Malmendier said.
The November forecast from the government’s advisory board estimated that growth would be just 0.7% in 2024. The next official update is expected in mid-May.
The bleak outlook for Germany comes amid concerns about its status as a favorable location for industry, as the government tries to reconcile its strict fiscal rules with the need to attract investment and help finance a transition. Green is expensive.
The government’s preliminary report points to a “normalization” of fiscal policy in 2024, after a constitutional court ruling forced the coalition to make painful cuts to its 2024 budget.
By Christian Kraemer, Rachel More and Reinhard Becker
2024-02-21 16:09:29