Berlin (Reuters) – The German Institute of Economic Studies IFO reduced its forecast for economic growth to Germany on Monday to 0.2%, citing in particular the low confidence of consumers and the reluctance of companies to invest.
However, a certain improvement is expected in 2026, when growth is expected to increase by 0.8%, IFO said.
IFO had scheduled in December that the increase in the German gross domestic product (GDP) would be limited to 0.4% this year if the first economy in the euro zone could not overcome its structural challenges.
The latest forecasts were made last Thursday, specifies IFO, on the eve of the day when the probable future German Chancellor Friedrich Merz announced a crucial agreement with the Greens on the reform of the “debt brake”, which should allow a massive increase in federal expenses.
“The German economy is blocked. Despite a recovery in purchasing power, consumers’ feeling remains moderate and businesses are also reluctant to invest,” said Timo Wollmershaeuser, responsible for IFO forecasts.
Germany has become the only country in the G7 to record a contraction in the past two years.
The industrial sector is faced with low demand and increased international competition, as well as the risks posed by political uncertainties in the United States, adds IFO, which warns that exports could be particularly affected by the increase in American customs duties on European products.
(Written by Miranda Murray, Diana Mandiá, edited by Augustin Turpin)
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