Anticipated Mini-Dip in German GDP by Economic Organizations
The major economic institutions in the country have revised their predicted growth rate downward. Instead of a slight increase of 0.1%, they now anticipate a minimal decrease of 0.1% in the country's GDP this year, as stated in their collective diagnosis report. The projected recovery for 2025 appears to be more promising, albeit still subpar, with an initial growth rate of only 0.8%.
Geraldine Dany-Knedlik from the German Institute for Economic Research Berlin (DIW) explained, "Besides the cyclical downturn, structural changes are also negatively impacting the German economy. Factors such as decarbonization, digitalization, demographic change, and ostensibly stronger competition from Chinese companies are causing structural shifts that dampen the growth prospects of the German economy." Last year, Germany experienced a 0.1% decrease in GDP, considering price and calendar effects.
The sectors most affected are industry and notably investment and energy-intensive sectors. "Their competitiveness is affected by rising energy costs and intensifying competition from high-quality industrial products from China, which are displacing German exports globally," the economic institutions said. This has led to persistent low investments.
High interest rates and uncertainties put pressure
The experts identified high interest rates and significant economic and geopolitical uncertainty as the primary culprits behind the cyclical downturn, which has impacted both investment activity and private household consumption. "Private households are increasingly saving instead of investing in new residential properties or consumer goods," they stated.
The economists point to "a revival in the economic cycle in critical sales markets like neighboring European countries" as positive aspects, which will boost German foreign trade. However, the economic weakness is now leaving "more apparent impacts" on the labor market. "It is only towards the end of next year, when economic activity starts to recover, that unemployment rates might start to decrease again."
The following institutions contributed to the collective diagnosis this fall: DIW, IFO Institute Munich in collaboration with the Austrian Institute for Economic Research, Kiel Institute for the World Economy, Leibniz Institute for Economic Research Halle, and Leibniz Institute for Economic Research Essen in collaboration with the Institute for Advanced Studies Vienna.
Despite the collective efforts of major economic institutions in Germany, the country's predicted GDP growth for this year has significantly shifted from a slight increase to a minimal decrease, impacting Germany's economic outlook. The experts at the German Institute for Economic Research Berlin (DIW) have attributed this structural shift to factors such as decarbonization, digitalization, demographic change, and increased competition from Chinese companies.
