The economists at Commerzbank assume that the German economy will continue to shrink next year. The bank is therefore significantly more pessimistic than the economists and the federal government.
In its new economic forecast, Commerzbank calculates that gross domestic product will shrink by 0.3 percent in 2024. According to bankers’ calculations, Germany will end the current year with a loss of 0.4 percent.
While there is widespread agreement about the negative trend this year, most experts expect the economy to improve next year. In their report presented this week, the so-called economists are assuming growth of 0.7 percent for next year. The federal government is even calculating an increase of 1.3 percent for 2024. The Landesbank Hessen-Thüringen (Helaba) came to the same conclusion this week.
Consumers remain cautious
Commerzbank chief economist Jörg Krämer justifies the bank’s more pessimistic outlook, among other things, with the lack of private consumption. Although inflation is falling and wages are rising, consumers are reacting to this much more slowly than in the past. One reason could be: While wages have risen by around ten percent since the end of 2020, consumer prices have increased by 18 percent at the same time. In addition, many consumers have not been able to save in recent years.
Commerzbank sees companies that are still heavily burdened as a further problem. Although they are resilient, they have a lot to digest. For example, despite the electricity cost relief package just launched by the federal government, the bank expects energy prices to remain high. In addition, due to various crises, it is becoming apparent that the global economy is growing at a below-average rate. This is a problem for the heavily export-oriented German economy. “Adapting to all these pressures is likely to take a long time because the quality of the location has been eroding for around 15 years,” says chief economist Jörg Krämer.
Inflation remains high
According to economists at Commerzbank, an additional challenge is that the inflation rate will not return to the two percent targeted by the central banks next year. Chief economist Jörg Krämer says: “Three percent inflation for 2024 is more likely.”
Because of the “unresolved interest rate problem”, Commerzbank also does not share the financial markets’ assessment that the European Central Bank will lower key interest rates several times in the coming year. Since companies would have difficulty adapting to the regime of increased key interest rates, Commerzbank expects “only a bloodless economic recovery” in all western countries and even a shrinking economy in Germany. Jörg Krämer states: “We are more cautious than most economists.”