DIW lowers its economic forecasts
The German Institute for Economic Research (DIW) is lowering its economic forecasts, partly due to the cuts in the federal budget. Gross domestic product in Germany will only grow by 0.6 percent in the coming year and by 1.0 percent in 2025, the Berlin-based researchers announced on Thursday. Previously, they had assumed an increase of 1.2 percent in each case. For the year coming to an end, the experts expect a decline of 0.3 percent (previously: -0.4 percent).
"Investment projects that were thought to be safe are now up for discussion," said Geraldine Dany-Knedlik, Co-Head of Forecasting and Economic Policy at DIW, with a view to the budget crisis. "Funding may not be able to flow." These cuts and uncertainties are likely to reduce growth by 0.3 percentage points in 2024 and 0.2 percentage points in 2025.
The Federal Constitutional Court had stripped the government of 60 billion euros from the KTF climate fund because it had been transferred there in an unconstitutional manner. To close the gap, a higher CO2 price for petrol and heating fuels is planned, among other things. In addition, aviation fuel will be taxed, while a billion-euro subsidy for electricity grid fees will be abolished. "The agreement on the 2024 budget is a lazy compromise and a huge missed opportunity to make Germany fit for the future again," said DIW President Marcel Fratzscher.
He is in favor of a special climate protection fund of 100 billion euros, which is firmly anchored in the constitution and thus exempt from the debt brake. Germany needs significantly higher public and private investment in the ecological and digital transformation, also in order to maintain competitiveness and retain jobs. Fratzscher also proposes a fundamental tax reform. "Priority must be given to reducing climate-damaging subsidies, which amount to 60 billion euros a year in Germany," said the DIW boss. "In addition, privileges such as inheritance tax and real estate gains should be abolished."
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The reductions in the federal budget, as criticized by DIW President Marcel Fratzscher, are partly contributing to the institute lowering its economic forecasts for Germany. These reductions, including the defunding of investment projects and the introduction of higher CO2 prices, are expected to negatively impact growth by 0.5 percentage points in the next two years, according to DIW's Co-Head of Forecasting and Economic Policy, Geraldine Dany-Knedlik.
Source: www.ntv.de
