The German Ifo Institute has revised up its forecast for German GDP growth for the current year, citing an improvement in consumer purchasing power and a recovery in global trade in goods and industrial production in the second half of the year.
The Ifo Institute now expects the economy to expand by 0.4% in 2024 (+0.2% compared to the previous forecast presented in March). As for 2025, the forecast for GDP growth remained at 1.5%. Meanwhile, the government's latest forecast assumes GDP growth of 0.3% this year. However, the European Commission predicts that the German economy will grow by only 0.1% in 2024. At the start of this year, Germany skirted a recession, growing by 0.2% q/q in the first quarter. In the last quarter of 2023, the economy shrank 0.5%.
“The German economy is gradually overcoming the crisis. The second half of 2024 should be significantly better than the first," the Ifo Institute said, adding that the purchasing power of private households should continue to grow this year, and the overall economic recovery should accelerate as the consumer economy normalizes.
As for the inflation outlook, the Ifo institute forecast that CPI growth will slow to 2.2% this year from 5.9% last year and reach 1.7% next year.