German economic institutes reduce 2024 growth forecast to 0.1%

On Wednesday, a group of leading economic think tanks released their six-monthly “collective diagnosis” of the German economy for early 2024. The report, titled “German economy ailing — reforming the debt brake is no cure-all,” highlighted that Germany’s economy is currently struggling with a phase of economic weakness persisting and growth forces dwindling.

The summary of the report predicted that while the situation may start to improve soon, the overall dynamic will not be “all that great.” Both economic and structural factors are overlapping, contributing to the sluggish overall economic development. The report emphasized that consumers and their recovering purchasing power, as inflation sinks and wages rise in many sectors, will be crucial for the economic recovery.

In collaboration 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, the German government also revised its economic forecasts downwards. There is a warning of the likelihood of entering a technical recession by the end of the first quarter of 2024, following a 0.3% year-on-year contraction in German GDP in the last quarter of 2023.

One contributing factor to the economic challenges in recent months has been frequent strikes impacting rail network and air travel in Germany. These strikes have led to canceled flights and trains, with knock-on effects for other sectors. However, a major labor dispute between national rail operator Deutsche Bahn and GDL train drivers’ union was resolved earlier this week with a breakthrough deal after months of negotiations. Despite these challenges facing Germany’s economy

By Sophia Gonzalez

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