June 15, 2024

Germany’s Economic Outlook Faces Challenges with Low Domestic Demand and High Energy Prices

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Economic Growth in Germany Hindered by Experts.

Germany’s economic research institutes have collectively revised their GDP outlook for the country, citing low domestic demand and high gas and electricity prices as the main factors. In their report, they downgraded their previous growth forecast from 1.3% to just 0.1%. The group of leading economic think tanks emphasized the importance of consumer purchasing power in improving the economic outlook.

The report highlights that Germany’s economy is showing signs of weakness, with declining growth forces and overlapping economic and structural factors contributing to sluggish overall economic development. Despite a recovery expected to begin in the spring, experts cautioned that momentum may not be significant. High energy prices are also affecting the competitiveness of energy-intensive goods, which is a key strength of the German economy.

Another challenge facing Germany’s economy is a sharp tightening of fiscal policy by the government in preparation for the return of the constitutional debt brake, which restricts new debt issuance. As a result, Germany was one of the worst-performing major economies globally last year. However, projections for next year anticipate growth picking up to 1.4%. The “diagnosis” was compiled by five prominent German economic research institutes, including DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich.

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