A new alarm bell for the German economy is ringing in Berlin today from the leading German institutes, which are forecasting extremely low growth of just 0.1%. They are thus drastically revising downwards the estimates, given that only in the fall of 2023 they expected growth of around 1.3%.

For German economists, it seems that the German economy has not yet recovered from the shock of the pandemic and they even note in the new report that the country’s productivity has not actually recovered since then.

“The German economy is weakening.” This is the conclusion reached by the German economic institutes, and this in a context of “headwinds” blowing both in the domestic and international markets.

Structural aggravating factors

However, according to the report, the contraction in growth is due to a series of already known structural factors, such as the transfer of a large part of production abroad, the decrease in exports, the structural problems in the critical construction sector, but also the international economic environment that does not favors Germany.

Already in his first comment on German radio, the representative of K.O. of the Liberals (FDP) for budget matters, Reinhard Huben, estimates that “2024 will also be a difficult year” so less room for flexibility in fiscal policy should be expected.

The report presented on Wednesday morning was compiled by the German Institute for Economic Studies in Berlin, the Kiel Institute for World Economy, the Leibniz Institute for Economic Research in Halle, the Leibniz Institute for Economic Research in Essen and the Ifo Institute in Munich.

In terms of inflation, the forecasts of economic institutes speak of a reduction to 2.3% in the current year and 1.8% in 2025.