Sluggish Growth Forecast for Germany: Experts Blame High Energy Prices and Domestic Demand

Germany, the world’s fourth-largest economy, is facing a tough economic outlook. Five economic research institutes in the country have recently reduced their GDP forecast for the next year from 1.3% to 0.1%. The report emphasizes that consumer purchasing power is key to improving the economic outlook, noting that domestic demand has not increased as expected due to high gas and electricity prices affecting the competitiveness of energy-intensive goods.

Experts highlight that the government’s strict fiscal policies aimed at adhering to the constitutional debt brake have limited its ability to issue new debt and support economic growth. The previous year saw Germany’s economy perform poorly, with it being the poorest performing major economy globally. However, next year’s forecast anticipates a slight improvement in growth to 1.4%.

The report provides a comprehensive analysis of the current state of the German economy and factors influencing its performance by five economic research institutes, including DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich. It notes that weak growth forces and economic factors are contributing to sluggish overall progress. Experts have highlighted that low domestic demand and high gas and electricity prices impact exports negatively, leading to a tough economic outlook for Germany.