Forecast: German economy to shrink by 0.5 percent in 2024

Economic situation - Forecast: German economy to shrink by 0.5 percent in 2024

In view of the crisis situation, the German Economic Institute (IW) expects German economic output to decline in the coming year. Gross domestic product (GDP) is expected to fall by 0.5 percent in 2024, according to the pro-employer institute. This would be the second consecutive year of economic contraction.

The German government recently forecast growth of 1.3 percent for the coming year. The German Council of Economic Experts, which advises the government, forecast growth of 0.7 percent.

Uncertainty due to the budget crisis

According to the IW, however, the general conditions remain so poor that this will not succeed. Companies are particularly unsettled by the dispute over the federal budget. Many are postponing their investments, according to the analysis.

For the forecast, the IW researchers used model calculations to examine how this would affect the economy. According to the calculations, government spending of over 20 billion euros will be cut. This would push GDP down by around 0.5 percent. "In the worst case, a decline of one percent is even possible."

The IW published its forecast before details of the coalition government's agreement on the 2024 federal budget became known.

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1. Despite the Federal Government's forecast of 1.3% growth in 2024, the Institute of the German Economy (IW) predicts a contraction of 0.5% due to the persisting budget crisis, which is causing uncertainty among companies and leading to delayed investments.
2. The IW's analysis shows that a potential reduction of over 20 billion euros in government spending could further exacerbate the economic situation, possibly causing GDP to decline by up to 1%.
3. The German Economic Institute (IW) expects the economic performance of Germany to deteriorate in 2024, following a forecast of 0.5% contraction, which would mark the second straight year of economic shrinkage.
4. In light of the poor general conditions, the pro-employer IW doubts that the German government's growth projection for the upcoming year will be achieved, citing the ongoing dispute over the federal budget as a major concern.

Source: www.stern.de