Germany’s economy shows no signs of recovery: The country’s GDP will decline again in 2024, and stagnation is expected in 2025, according to a review by the Kiel Institute for the World Economy (IfW).
Experts expect Germany’s GDP to decline by 0.2% this year. The decline will be marked for the second year in a row – in 2023, the German economy shrank by 0.3%. In 2025, Germany’s GDP growth will be zero, analysts predict.
The autumn forecast predicted that the country’s GDP would decline by 0.1% in 2024 and grow by 0.5% in 2025.
The main reasons for the deterioration of the forecasts are the expected introduction of US tariffs and the deepening crisis in the German industry, IfW experts say.
“The crisis is largely a crisis of the manufacturing sector,” said Stefan Koots, head of the IfW’s economic forecasting department. – “It shows symptoms typical of the periods following major macro shocks.
“The German economy is struggling with a decline in competitiveness, which is reflected in the weakness of overall economic indicators, which hardly allow us to count on any upward impulses,” the expert added.
The growth rate of consumer prices in Germany will reach the European Central Bank’s (ECB) target of 2% only by the end of 2026, not 2025, as expected in the Institute’s previous forecast. The average inflation rate in 2024 and 2025 will be 2.2%, according to IfW.
Unemployment in Germany will be at 6% this year and 6.3% in 2025 and 2026, according to the IfW. This is worse than the fall forecast of 6.1% for 2025 and 5.9% for 2026.
Experts assume that Germany will be able to reduce the budget deficit from 2.6% of GDP in 2023 to 2.3% this year and 1.9% in 2025. In 2026, the budget deficit is projected at 2.1% of GDP. In the fall, IfW expected the budget deficit to be 1.7% in 2025 and 2026.
You can learn more about current trends in the global economy in the video analysis by Maksym Urakin and the Experts Cub think tank on the Experts Club YouTube channel: https://www.youtube.com/watch?v=grE5wjPaItI
