A collective diagnosis of the German economy for early 2024 was released by a group of leading economic think tanks on Wednesday. The report, titled “German Economy in Turmoil: Reforming the Debt Brake is Not the Solution,” downgraded the growth forecast from 1.2% to near-stagnation at 0.1% for the year. According to the summary, Germany’s economy is struggling due to a phase of economic weakness accompanied by dwindling growth forces. Both economic and structural factors are contributing to the sluggish overall economic development.
The report highlighted that consumers and their recovering purchasing power, as inflation sinks and wages rise in many sectors, would be the most important fuel for the economic recovery. The collective diagnosis is a collaboration between leading German economic institutes including DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich. The German government also revised its economic forecasts downwards, warning of the likelihood of entering a technical recession by the end of the first quarter of 2024. German GDP contracted by 0.3% year-on-year in the last quarter of 2023, meeting the criteria for a technical recession with two consecutive quarters of negative growth.
One contributing factor to the economic challenges has been frequent strikes impacting rail network and air travel in Germany, leading to canceled flights and trains. However, a resolution was reached earlier this week between Deutsche Bahn and GDL train drivers’ union after months of negotiations over labor disputes affecting workers across industries. Despite these challenges, the report indicates that Germany’s economy is expected to return to slight growth in
