According to new estimates provided by the Kiel Institute for the World Economy (IfW), Germany's GDP will shrink by 0.1% this year. Thus, experts have worsened their previous forecast, which assumed a moderate expansion of the economy in 2024 after its contraction by 0.3% in 2023.
According to the latest official data, GDP fell by 0.1% q/q in the second quarter of 2024 after growing by 0.2% q/q in the first quarter. On a yearly basis, the economy showed no growth, compared with a 0.1% contraction in the first quarter.
Meanwhile, IfW experts said they expect the unemployment rate in Germany to rise further - to 6.0% in 2024 and to 6.1% in 2025. This increases the likelihood of a new recession. As for the inflation situation in Germany, IfW experts predict that the rate of inflation is set to ease to the ECB's 2% target by the end of next year.
"The previous positive signals received from the early indicators were disappointing. A lack of confidence among households is holding back spending, while the key manufacturing sector continued to slump," said Stefan Kooths, the institute's head of forecasting.