Germany’s Economic Growth Forecast Revised Downward: Domestic Demand and High Energy Prices Take Blame

Economic growth forecasts for Germany lowered by experts due to economic struggles

Germany’s economic outlook has been revised downward by five economic research institutes. The forecasts, which are part of the institutes’ six-monthly “collective diagnosis” of the German economy, attribute this decline to low domestic demand and the impact of high gas and electricity prices on exports.

The initial growth forecast of 1.3% made last autumn has been revised down to just 0.1%. The report emphasizes the importance of consumer purchasing power in improving the economic outlook. It notes that the German economy is currently facing challenges, with weak growth forces and economic factors contributing to sluggish overall progress.

Experts have highlighted that domestic demand has not increased as anticipated due to high gas and electricity prices, which have affected the competitiveness of energy-intensive goods, an area where Germany typically excels. Additionally, the government’s strict fiscal policies aimed at adhering to the constitutional debt brake have limited its ability to issue new debt and support economic growth.

In contrast to next year’s forecast anticipating growth to increase to 1.4%, Germany’s economy was previously the poorest performing major economy globally. However, experts from DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich provide a comprehensive analysis of the current state of the German economy and the factors influencing its performance.

Overall, these insights underscore concerns about sluggish growth forces and economic factors contributing to weak overall progress in Germany’s economy.

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