The International Monetary Fund (IMF) sees no change in the weakening of the German economy. Next year, German economic output will grow by just 0.8 percent, which is 0.5 percentage points less than forecast in July, according to data from the latest IMF forecast.
THERE IS NO ECONOMIC GROWTH THIS YEAR
For the current year 2024, the IMF predicts the weakest growth for Germany among the major industrial countries (G7). The IMF now expects growth of 0 percent, which is 0.2 points less than the forecast in July. According to the forecast, Germany should be at the bottom next year along with Italy. “Germany will be weighed down by problems with budget consolidation and a sharp drop in real estate prices,” said the forecast from the IMF, which has long criticized Germany’s structural problems such as a lack of skilled workers in Germany. Even the content of consumers in spending is reflected in this general situation.
THE FEDERAL GOVERNMENT EXPECTS ECONOMIC GROWTH
The German government even expects a recession this year, but is more optimistic than the IMF about economic growth next year. According to the latest information, the government expects an increase of 1.1 percent in 2025. Similar is the forecast published at the end of September by the Organization of Industrial Nations OECD, which assumes economic growth of 1.0 percent. The IMF’s outlook for the global economy is somewhat better—but not overwhelmingly so. An increase of 3.2 percent is expected both this year and next year. The IMF calls the global forecast “stable, but not too great” and warns of uncertainty and risks.
PROBLEMS IN THE EUROZONE
India, China and the US continue to be the growth drivers of the global economy. The outlook for the United States ahead of the presidential election is better than previously expected. On the other hand, the Eurozone has been evaluated worse, for which Germany is primarily, but not only, responsible. For France, the second largest economy in the euro, the IMF lowered its economic growth forecast for next year by 0.2 points to 1.1 percent. According to experts, Italy, like Germany, suffers from “persistent weakness in industry”.
IMF SEES A DECREASE IN INFLATION
The biggest problem of the global economy recently is high inflation. But the situation has changed. “The global battle against inflation appears to have been largely won,” said IMF Chief Economist Pierre-Olivier Gourincha. The peak of inflation was reached in the third quarter of 2022 with 9.4 percent. At the end of next year, inflation should be 3.5 percent. According to him, inflation is slightly below the average of the years before the corona pandemic. This opens up space for lowering interest rates.
According to him, the situation is better in industrialized countries than in developing countries. Also, the prices of services are almost twice as high as before the crisis caused by the corona virus. The IMF cited geopolitical conflicts such as those in Ukraine and the Middle East as risks. According to the IMF, uncertainty is still high. “Now is the time to stabilize the debt dynamics and rebuild the financial protection layers”, said Gourincha. (DW)
