Germany's gross domestic product is expected to fall by 0.2 percent in 2024, according to a revised government forecast presented by Economy Minister Robert Habeck on Wednesday, meaning Europe's largest economy is headed toward recession. German GDP fell by 0.3 percent in 2023.
The German government previously expected GDP growth of 0.3 percent for this year. Robert Habeck expects GDP to grow at 1.1 percent by 2025, slightly above the 1 percent growth forecast for 2025 by the government at the start of the year.
This revised forecast is not surprising, as the country's leading economic research institutes expected a 0.1 percent decline in GDP for this year in their recently published revised forecasts. The rationale behind this is that businesses remain cautious due to the volatile economic and geopolitical situation, and that private households are increasingly focusing on saving their income rather than investing in home ownership or consumption. At the same time, the persistently high level of interest is holding back investments.
The government hopes that consumer consumption will rebound again next year and that more industrial products will be purchased from abroad, which could improve the business mood of German companies.
Berlin is also confident of the economic recovery impact of the stimulus package, which includes tax breaks, employment incentives and electricity subsidies.
According to Robert Habeck, if “these measures are fully implemented, the economy will grow more strongly and more people will find work again.”
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