Germany’s Economy Faces Slow Growth and High Uncertainty Despite Resolution of Major Labor Dispute

German economic institutes reduce 2024 growth forecast to 0.1% – DW – 03/27/2024

In early 2024, a group of leading economic think tanks released their six-monthly “collective diagnosis” of the German economy. Titled “German economy ailing — reforming the debt brake is no cure-all,” the report revised the growth forecast down from 1.2% to near-stagnation, at 0.1% for the year. The summary of the report stated that Germany’s economy is struggling due to a phase of economic weakness accompanied by dwindling growth forces. Both economic and structural factors are contributing to the sluggish overall economic development.

One significant challenge facing Germany’s economy has been frequent strikes impacting its rail network and air travel, leading to canceled flights and trains. However, a resolution was reached in one of the major labor disputes between Deutsche Bahn and the GDL train drivers’ union earlier this week after months of negotiations. Despite these challenges, the report indicates that the German economy is forecasted to return to slight growth in the near future.

The collective diagnosis is a collaboration between leading German economic institutes including DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen, and Ifo in Munich. The German government also revised its economic forecasts downwards, warning of the likelihood of entering a technical recession by the end of the first quarter of 2024. German GDP contracted by 0.3% year-on-year in the last quarter of 2023, meeting the criteria for a technical recession with two consecutive quarters of negative growth.

According to experts from various think tanks and government agencies alike, consumers will be crucial for an economic recovery as inflation sinks and wages rise in many sectors. While this may provide some relief in terms of purchasing power, it may not be enough to drive significant growth or lift Germany out of its current state of stagnation entirely. Overall, while some improvement may be on horizon soon, experts believe that this will not be “all that great.”

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