by Maria Martinez
BERLIN (Reuters) – German economic growth could be limited to 0.4% next year if the country fails to overcome its structural challenges, the Ifo institute warned on Thursday.
The German Institute for Economic Studies, on the other hand, estimates that the country’s gross domestic product (GDP) could rise to 1.1% if Europe’s largest economy implements the necessary measures.
In its September forecasts, Ifo expected GDP to be 0.9% for 2025, but due to the uncertainties weighing on the German economy, the organization says it is now considering two scenarios.
“At present, it is not yet clear whether the current phase of stagnation is a temporary weakness or a permanent weakness and therefore a painful change in the economy,” writes Timo Wollmershaeuser, head of forecasting at the Ifo institute.
According to Timo Wollmershaeuser, the current cycle of monetary policy tightening in Europe and many German export markets has contributed to weak industrial orders, which is weighing on the economy.
Consumers have, however, regained purchasing power and inflationary pressure should continue to ease, notes the economist.
In the two scenarios presented on Thursday, the Ifo institute forecasts inflation at 2.3% for 2025 and 2.0% for 2026.
(Written by Maria Martinez; Claude Chendjou, edited by Blandine Hénault)
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