The German government will revise down its forecast for economic growth in 2024 to 0.2% from an earlier projection of 1.3%, Economy Minister Robert Habeck has warned, according to Bloomberg.
Habeck is expected to present the government’s latest economic report and updated forecasts next Wednesday. As among the key factors weighing on the economy the minister reportedly identified a ruling late last year by the Federal Constitutional Court that prohibited leftover Covid-stimulus funds from being repurposed because it upended the government’s budget planning.
“This of course has an immediate growth-crimping effect,” Habeck was quoted as saying during a panel discussion in Leipzig on Wednesday. He said the judgment forced the government to cut down on the amount of planned relief for companies and consumers from high energy prices. “The reality is that such measures would of course help support the economy,” the minister noted.
Germany was the only G7 economy to contract last year as it struggled with the fallout from the energy crisis. Official data shows the economy shrank by 0.3% year-on-year in 2023 under the pressure of soaring inflation and higher interest rates, as well as general weakness in the global economy. Economists, including at the country’s two largest lenders, Deutsche Bank and Commerzbank, predict another contraction in 2024.
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The economic institutes Ifo and IfW have both lowered their most recent 2024 forecasts for the German economy. Ifo is now projecting growth of 0.7% compared with its previous forecast of 0.9%, while the IfW cut its outlook to 0.9% from 1.3%.
German Finance Minister Christian Lindner stated this week that structural reforms are needed to strengthen the competitiveness of the EU’s economic heavyweight.
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