OECD halves economic forecast | tagesschau.de

The German economy is unlikely to grow much this year. The OECD has halved its forecast for Germany. Other countries are likely to gain more.

The economists at the Organization for Economic Cooperation and Development, OECD, assume that the German economy will grow by 0.3 percent this year. The forecast has therefore been halved. As recently as November last year, experts had assumed that the German economy would grow by 0.6 percent in 2024.

This means that Germany continues to lag behind in international comparison. According to the updated forecast, growth is likely to be greater in Spain, Italy and France. “This is mainly because the energy-intensive industry has a greater weight in the German economy than in other countries in the Eurozone,” says OECD expert Isabell Koske, explaining the expected weak performance of Europe’s largest economy. However, the difference to the USA is particularly clear. Economic researchers are forecasting growth of 2.6 percent for the US economy.

Weak global economy weighs on

The OECD figures show how tense the situation currently looks for companies in the German economy. The reasons are varied: export companies continue to suffer from the weak global economy. Many companies are complaining about a decline in orders. “The budget crisis has also increased uncertainty for companies and households,” said OECD expert Koske, also calling it a home-made problem.

After the Constitutional Court ruling on the debt brake, the federal government embarked on a course of austerity. The crisis led to a decline in investments in the fourth quarter of 2023 and held back private consumption.

There is also a risk of recession in 2024

The current OECD figures indicate that a negative trend from last year is now continuing. In 2023, the gross domestic product in Germany shrank by 0.3 percent, according to the Federal Statistical Office. A decline in the current year also does not seem to be ruled out. However, the estimates for 2024 vary. While the Munich Ifo Institute forecasts growth of 0.7 percent, the German Economic Institute (IW) expects a decline of half a percent.

Experts expect the German economy to remain stuck in recession at the beginning of the year. Economic output had already declined in the final quarter of last year. The outlook remains cloudy. For example, according to the monthly survey by the Munich ifo Institute, the mood in companies worsened in January. Economists speak of a “technical recession” when there are two consecutive quarters of shrinking economic output.