IW predicts another year of recession
The budget chaos is having an impact on the country's growth prospects, according to the pro-employer economic research institute IW Köln. In contrast to other major economies, there will also be a recession in the coming year.
The German Economic Institute (IW) expects another year of recession in 2024, partly due to the budget crisis. Gross domestic product is expected to shrink by 0.5 percent, as it did at the end of last year, according to the forecast by the employer-oriented institute.
The ongoing uncertainty surrounding the federal budget will push economic output down by half a percent because companies will postpone their investment decisions. Germany is alone among the major industrialized nations with this poor outlook: the USA is expected to grow by around 1.25 percent and France by 0.75 percent.
"The poor conditions in global trade are not the only reason for the continuing recession," said IW Director Michael Hüther. "The German government has played a decisive role in this crisis." The traffic light coalition must therefore now demonstrate its ability to act in terms of fiscal policy.
"Need a solution to financial policy chaos"
The German economy is absolutely dependent on investment stimulus. "In the short term, a special fund similar to that of the Bundeswehr can provide relief," said Hüther. "In the long term, a reform of the debt brake must be on the agenda."
The IW researchers expect inflation to ease. According to them, consumer prices will rise by an average of three percent next year, only half as much as in 2023. However, they expect unemployment to rise: the unemployment rate will increase to six percent, after around 5.75 percent at the end of last year.
"The German government has proved to be a real brake on the economy this year," said IW economic expert Michael Grömling. "We need a quick solution to the fiscal chaos." Important investments must not fall by the wayside.
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Source: www.ntv.de
