Germany's Economic Forecasts Revised Downward

Leading economic institutes such as DIW, Ifo, and the OECD have revised their forecasts for Germany, signaling a downturn in the nation's economic prospects. The GDP is expected to decline by 0.1% in 2023, with a modest growth of 0.8% anticipated in 2024. The OECD's outlook mirrors this trend, projecting a 0.1% growth for 2023 and 1.0% for 2024. Germany's economic stagnation stands in stark contrast to the more optimistic forecasts for other countries like Spain, which is expected to grow by 2.8% in 2024, and the global economy at 3.2%.

High energy prices, bureaucratic hurdles, and a shortage of skilled labor are key factors hindering Germany's growth. Associations and banks are urging the government to implement significant reforms and invest in renewable energy, infrastructure, and education.

The German export industry is also facing challenges, with a notable decline in foreign orders particularly in the metal and automotive sectors. Despite rising real wages and decreasing savings rates, consumer spending remains subdued.

The OECD highlights that while global trade is recovering faster than expected, Germany's economic outlook remains bleak, with risks from geopolitical tensions and trade policy uncertainties. The upcoming government growth package aims to address these issues, but the path to recovery appears to be fraught with challenges.

The institutes' joint fall 2024 diagnosis, expected to be presented on Thursday, will provide further insights into Germany's economic trajectory.