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Construction site in Schleswig-Holstein: Germany is standing still

Photo: Christian Charisius / picture alliance / dpa

Germany's economy is ailing. In their spring report, the five leading economic research institutes have significantly revised their forecast for the current year downwards. They now only expect economic output to grow by 0.1 percent. In the fall they had assumed that gross domestic product would increase by 1.3 percent in 2024. The inflation rate is expected to fall to 2.3 percent this year and to 1.8 percent next year.

The federal government expects growth of 0.2 percent this year. In 2023, economic output fell by 0.3 percent.

According to the researchers, things are looking better for the coming year. They leave the forecast almost unchanged at plus 1.4 percent.

"In the current triad of sluggish economic activity, paralyzing politics and suffering growth, only the economic tone changes from minor to major," says Stefan Kooths, head of economic activity at the Kiel Institute for the World Economy (IfW Kiel). Although a recovery is likely to begin in the spring, the overall momentum will not be too great.

Economic performance is currently at a level that is barely higher than before the pandemic. Since then, productivity in Germany has stalled.

In the current year, private consumption is becoming the most important driving force for the economy, the researchers write. In the coming year, foreign business will increasingly contribute to growth.

According to experts, unemployment is only likely to increase slightly and will fall again from spring onwards. Over the year, the institutes forecast unemployment rates of 5.8 (2024) and 5.5 percent (2025).

The institutes recommend a careful reform of the debt brake in order to allow more debt-financed investments than before.

The German Institute for Economic Research in Berlin, the Kiel Institute for the World Economy, the Leibniz Institute for Economic Research in Halle, the Leibniz Institute for Economic Research in Essen and the Ifo Institute in Munich are involved in the so-called joint diagnosis.

mmq/dpa