German economy improving steadily, but slowly, says Bundesbank

Germany’s economy is slowly recovering from two weak years, according to the Bundesbank. The central bank’s latest economic forecast shows that rising private consumption and increased exports in the second half of the year are contributing to this improvement.

In the first quarter, Germany saw a minimal growth of 0.25%, mainly driven by exports and an uptick in construction investment. However, the Bundesbank anticipates a modest growth of 0.3% for the entire year of 2024, down from the previously projected 0.4% in December. In the medium term, economists at the central bank foresee stronger growth rates of 1.1% in 2025 and 1.4% in 2026.

The inflation rate in Germany is on a downward trend, albeit at a slower pace. The Bundesbank forecasts inflation of 2.8% for this year and 2.7% for 2025 based on the Harmonized Index of Consumer Prices (HICP). These figures are slightly higher than the previously estimated 2.7% for 2024 and 2.5% for 2025. Inflation remains persistant particularly in services despite energy and food prices being expected to decrease this year according to Bank’s notes.

Germany’s recovery is driven by several factors including private households benefiting from higher wages, decreasing inflation, and a stable labor market as per Joachim Nagel, President of Bundesbank.

Overall Germany’s economy is showing signs of improvement with private consumption and exports driving this progression but there are still challenges such as rising inflation due to significant increase in wages that needs to be addressed by policymakers accordingly.

By Sophia Gonzalez

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