Economic situation - Ifo Institute lowers forecast for 2024
The Ifo Institute has lowered its forecast for the German economy. After a decline of 0.3 percent in the current year, the Munich-based economists believe that gross domestic product will probably only grow by 0.9 percent in 2024 instead of the previously expected 1.4 percent.
The development in the current quarter is weaker than expected and "this will also have an impact in the coming year", said Ifo head of economic research Timo Wollmershäuser in Berlin.
Uncertainty delays recovery
Consumers are saving and companies' willingness to invest is declining, said the Ifo economic researcher. The uncertainties surrounding the federal budget were contributing to this. With a cut of 20 billion euros, the economy would only grow by 0.7 percent.
Yet the course is basically set for recovery: Wages are rising strongly and employment is higher than ever before, said Wollmershäuser. Inflation is slowing down, with inflation likely to fall from around six percent this year to a good two percent next year. Interest rates have passed their peak. Purchasing power is returning and overall economic demand should pick up again. The Ifo Institute expects economic growth of 1.3 percent in 2025.
In terms of unemployment, the economic researchers expect an increase of 191,000 people this year and a further 82,000 next year. The unemployment rate would then rise to 5.9 percent. The number of people in employment is likely to increase by 353,000 this year and by 83,000 next year.
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- The lower forecast for 2024 also implies potential challenges for Germany's energy sector, as the demand for resources like gas could be affected.
- Timo Wollmershäuser shared his concerns about the impact of economic uncertainty on the German labor market, expressing worry about decreasing investment by companies.
- The ifo institute for economic research believes that if the federal budget undergoes a 20 billion euro cut, Germany's economic growth might decrease to 0.7%, requiring extra vigilance in energy planning and cost management.
- Berlin-based Timo Wollmershäuser underscored the importance of the rising wages in the German economy, but highlighted the influence of inflation on household budgets and energy expenses.
- With Munich-based economists at the ifo institute expecting a drop in prices from an estimated six percent in 2022 to around two percent in 2023, the interplay of energy costs, wages, and the general economic situation will remain a crucial factor in shaping Berlin's economic forecasts.
- The enhanced economic situation and recovery in 2025 could foster more opportunities in Germany's vast energy sector, with a potential boost in electricity consumption, gas utilization, and overall demand for resources.
Source: www.stern.de
