Economic Growth Forecast for Germany Reduced by Experts due to Weakness

The German economy is facing challenges, with experts noting a prolonged period of economic weakness and dwindling growth forces. Despite a potential recovery in the spring, the report suggests that the overall momentum might not be significant. One of the factors impacting the German economy is the lack of increase in domestic demand, partly due to high gas and electricity prices. These prices have caused a loss of competitiveness for energy-intensive goods, which are a strength of Germany’s exports. Additionally, the government’s strict fiscal policy, as a result of provisions for the constitutional debt brake, has limited the issuance of new debt. As a result, five economic research institutes in Germany have downgraded their GDP forecast from 1.3% to 0.1%.

The DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen and Ifo in Munich released their six-monthly “collective diagnosis” of the German economy. The report emphasized the importance of consumers’ purchasing power in improving the economic outlook. Experts noted that structural factors and sluggish overall economic development were contributing to this weakness. It was highlighted that despite potential recovery in spring but overall momentum may not be significant as it was notably one of worst performing major economies last year and forecast for next year predicted growth to pick up only to 1.4%.

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