The economy German economy is treading water
The German economy is stuck in the doldrums. According to forecasts, no boom is to be expected in the next two years either.
26.09.2024, 10:08
26.09.2024, 11:07
SDA
The German economy is treading water. Leading economic research institutes are lowering their economic forecasts. They expect gross domestic product in Germany to fall by 0.1 percent in the current year. Only a weak recovery is expected for the next two years, with growth of 0.8% in 2025 and 1.3% in 2026.
In the spring, the institutes had predicted a minimal increase of 0.1% for 2024 and expected growth of 1.4% for 2025.
Structural problems
In addition to the economic weakness, structural change is also weighing on the German economy, said Geraldine Dany-Knedlik, economic expert at the German Institute for Economic Research, according to the press release. "Decarbonization, digitalization, demographic change and probably also stronger competition with companies from China have triggered structural adjustment processes that are dampening the growth prospects of the German economy."
According to the forecast, structural change and the economic slump are particularly affecting the manufacturing industry. The competitiveness of capital goods manufacturers and energy-intensive industries is suffering from higher energy costs and increasing competition from high-quality industrial goods from China, which are crowding out German exports on the global markets.
Little investment - consumers are saving
According to the forecast, the persistently high level of interest rates and the high level of economic and geopolitical uncertainty are weighing on companies' investment activity. "Private households are increasingly putting their income on the high side instead of spending money on new residential buildings or consumer goods." At 11.3%, the savings rate was recently above its long-term level.
Political uncertainties
The institutes cite a "further significant increase in political uncertainty" as a risk. Although the German government has passed a draft budget for 2025, there is still concern that the governing coalition may be unable to act, according to the report, citing the many disputes within the so-called traffic light coalition.
The "growth initiative" does offer some good approaches. However, these are far from being implemented. The initiative is not helping to make economic policy clearer and more predictable for households and companies.
