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Container terminal in the port of Hamburg

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After the recession in 2023, the German economy is unlikely to do much better this year.

Leading research institutes have significantly lowered their economic forecasts and now only expect mini-growth.

Ifo President Clemens Fuest blamed the traffic light government for the situation.

“We clearly have structural problems,” said the top economist.

There is a lack of a joint response from the coalition of SPD, Greens and FDP.

The economy called for tax relief in order to get out of the slump.

“The German economy is paralyzed,” says the Ifo Institute.

The mood is bad and uncertainty is high.

The Ifo economists and the experts from the Kiel Institute for the World Economy (IfW) now assume that the gross domestic product (GDP) will shrink for the second quarter in a row at the beginning of 2024 and that Germany will therefore slip into a recession.

It was said that the situation would only get better from the middle of the year.

Government advisors actually expect stagnation for the year as a whole.

The Ifo lowered its GDP forecast from 0.7 to 0.2 percent, the Kiel experts cut their estimate from 0.9 to 0.1 percent.

Fuest accused the traffic light politicians of not having a strategy to restart the economic engine.

"There is no convincing concept." There are just different ideas within the coalition.

Economic policy is therefore a risk factor for the economic forecast.

Other states would be better off than Germany under similar international conditions.

There are no attractive investment conditions in housing construction and industry in Germany.

The planned Growth Opportunities Act - additional depreciation options for companies - is correct, but with a relief volume of a good three billion euros, it is too small.

“We would have to do a lot more.” A tax reform is just as necessary as a reduction in excessive bureaucracy.

Ifo economics chief Timo Wollmershäuser attributed the economic weakness to weak consumption, high interest rates and price increases, the government's austerity measures and the sluggish global economy.

However, there are signs of a slight improvement in the next few months.

»With the gradual removal of the burden on interest rates and prices and the effects of higher purchasing power for consumers, economic performance will accelerate towards the middle of the year.«

For 2025, the Ifo Institute increased its forecast by 0.2 points to 1.5 percent, while the experts from Kiel continue to expect growth of 1.2 percent.

The labor market should continue to be robust.

According to Ifo, the number of employees will even climb from 45.9 to 46.1 million and reach a record level of 46.2 million next year.

ssu/Reuters