The forecast issued by IfW Kiel undergoes adjustment, predicting a potential economic contraction in 2024.
According to economic analyst Stefan Kooths from IfW, the initial indicators from the summer didn't turn out as promising as anticipated, especially this year. The main issue has been subdued private consumption, as households have been hesitant to spend despite a rise in real income. Additionally, both industry and construction have taken a hit, slipping further into a recession.
As for the forthcoming year, IfW has lowered its projection significantly, moving from a projected growth of 1.1% to a mere 0.5%. However, the German economy is expected to pick up speed again, thanks to increased incomes, increased foreign demand, and lower interest rates. The unemployment rate may spike to 6.1%, but inflation should gradually decrease to 2%.
Looking ahead to 2026, IfW initially predicts an economic growth of 1.1%. However, it's important to note that 0.3 percentage points of this growth can be attributed to the higher number of working days.
IfW revised its growth projection for the next year down to 0.5%, citing subdued private consumption and challenges in industry and construction. Despite anticipating a spike in unemployment to 6.1% in the near future, IfW expects inflation to decrease gradually to 2%.
