Instead of 0.2 percent, the federal government is expecting 0.3 percent growth for the current year – this is based on the spring projection by Economics Minister Habeck. He expects growth of 1.0 percent in 2025.
The federal government estimates the economic prospects for Germany to be somewhat more favorable than at the beginning of the year. The forecast for economic growth this year is raised by 0.1 percentage points to 0.3 percent. This is based on the spring projection presented by Economics Minister Robert Habeck.
“Economic turning point”
“There are increasing signs that the German economy will be at an economic turning point in the spring of 2024,” says a press release from the Ministry of Economic Affairs. After price increases, especially in the energy sector, and high inflation, new buoyant forces are now noticeable.
“Electricity and gas cost about as much on the stock exchange today as they did before the energy price shocks. And: prices have fallen faster than many predicted,” Habeck is quoted as saying in the statement. The government’s measures had their effect. Industry and especially the energy-intensive areas benefit from the lower prices. Production has increased noticeably since the beginning of the year.
Lower inflation, more private consumption
For the current year, the government expects the economy to recover and gain momentum. The reasons are lower inflation rates, monetary easing and the growing global economy, from which the export-oriented German economy benefits.
Important growth impulses are also likely to come from private consumption over the remainder of the year, according to the statement: Higher real wages and a stable labor market could overcome the loss of purchasing power of private households and lead to a revival in private consumption. This was also indicated by the GfK consumer climate index and the HDE consumer barometer.
One percent growth expected in 2025
“For 2025, we continue to expect the recovery to consolidate with inflation continuing to decline and real incomes rising. Overall, we then continue to expect real GDP growth of 1.0 percent,” said Habeck.
According to the Ministry of Economic Affairs, consumer prices are likely to fall further significantly to 2.4 percent in the current year after a rate of 5.9 in the previous year. In 2025, the inflation rate should be 1.8 again, below the ECB target of 2.0 percent.
“Nothing we can be happy with”
Nevertheless, Habeck also practiced self-criticism: “0.3 percent is of course not something we can be satisfied with,” he said. The federal government must continue to work on strengthening Germany as a business location. “Despite these signs of hope, the structural problems continue to worry me,” he explained.
“If we want to achieve higher growth again in the medium and long term, we need structural changes.” This included strengthening innovation and reducing unnecessary bureaucracy, but also work incentives “so that more people voluntarily work more and longer.” Business associations have been calling for significant relief for companies for a long time.
Even with the slightly improved growth, Germany is in a poor position compared to other countries. Especially since the starting position is bad: last year the German economy shrank by 0.3 percent. No other large industrial country is currently developing worse.