Germany’s GDP Forecast Revised Downward due to High Energy Prices and Fiscal Policy

Economic growth for Germany cut by experts

Five economic research institutes in Germany have lowered the country’s GDP forecast due to factors such as high gas and electricity prices affecting exports. These leading economic think tanks in Germany issued their biannual “collective diagnosis” of the German economy, revising their previous growth forecast from 1.3% to just 0.1%. The report highlighted the importance of consumer purchasing power in improving the economic outlook.

The German economy is experiencing weakness with growth forces dwindling, according to a report by five leading economic research institutes in Germany. Economic and structural factors are contributing to sluggish overall economic development, despite a recovery being expected to start in the spring. However, the momentum is not anticipated to be significant. Domestic demand did not rise as projected, partly due to high energy prices making energy-intensive goods less competitive, despite being a strength of the German economy.

Another factor affecting the German economy is the government’s strict fiscal policy, which is preparing to adhere to the constitutional debt brake regulations limiting new debt issuance. As a result, Germany had the lowest-performing major economy worldwide last year. Nonetheless, growth is expected to improve in the coming year, with a forecast predicting a 1.4% increase. The collaborative report was compiled by DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen and Ifo in Munich.

Sophia Reynolds

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