Written by Klaus Lauer
BERLIN (Reuters) – Germany’s economy will stagnate in 2024 and continue to lag behind European countries despite a stronger-than-expected start to the year, according to the German economic institute IW. .
According to IW’s latest forecast, the manufacturing and construction sectors in particular remain in recession. It was first reported by Reuters and is expected to be made public later on Wednesday.
Consumption will likely pick up as inflation eases, providing the only bright spot.
“That’s not enough for a real rally. In addition to consumption, we need to finally start investing,” said IW economist Michael Gromling. “There is now a huge gap (in investment).”
Investment is depressed as geopolitical conditions and high interest rates make financing more expensive.
Hit by high energy costs, weak global orders and record high interest rates, Germany’s economy shrank by 0.2% last year, making it the weakest of any major eurozone country.
IW expects Europe’s largest economy to grow by 0% this year, with France, Italy, the UK and the US all expected to expand, once again lagging behind.
Germany avoided recession at the beginning of this year, with first-quarter growth increasing by 0.2% on an adjusted basis compared to the previous three months. In the last quarter of 2023, the economy contracted by her 0.5%.
The German government forecasts GDP growth of 0.3% this year.
“What we need is a policy boost to improve the economy,” Gromling said. “If nothing changes, we will continue to waste potential.”
IW estimates that external trade will remain weak this year, providing little stimulus.
Germany’s unemployment rate is likely to rise to an average annual rate of 6% from 5.7% in 2023, according to IW.
“Despite the record average number of employed people in 2024 of 46 million people, the effects of the economic downturn on the German labor market are becoming more pronounced,” Gromling added. Ta.
(Reporting by Klaus Lauer; Writing by Maria Martinez; Editing by Susan Fenton)