The German government no longer expects economic growth this year, according to which the gross domestic product (GDP) will fall by 0.2 percent. Economy Minister Robert Habeck announced this at a press conference today. Chancellor Olaf Scholz’s cabinet originally expected growth of 0.3 percent. The German economy recorded a decline last year as well.
Germany will return to growth in the coming year, with GDP expected to grow by 1.1 percent, according to the updated outlook. In the spring, the government predicted one percent growth for next year. For the year 2025, the cabinet now expects growth in household consumption as well as a strengthening of the export of industrial products abroad. The Ministry of Economy also published an outlook for the year 2026, when, according to it, GDP growth should reach 1.6 percent.
Inflation is expected to slow to 2.2 percent this year, 2.0 percent next year and 1.9 percent the year after, according to the German government’s expectations. Last year it was 5.9 percent.
The German economy is the largest in Europe and many Czech companies depend on it. But it is troubled by the weakening of the industrial sector due to the stoppage of natural gas supplies from Russia after the invasion of Russian troops in Ukraine, as well as weak demand in China and the difficulties of the automotive industry in connection with the transition to electric cars.
At the end of September, the leading German economic institutes also worsened the outlook for the development of the German economy for this year. According to them, GDP will decrease by 0.1 percent. Last year, the German economy contracted by 0.3 percent, and its performance was the weakest of all eurozone countries. For the next two years, the institutes predict only a weak recovery – next year, according to them, the economy will grow by 0.8 percent and the following year by 1.3 percent.
If the forecast comes true, Germany will become the only country in the group of economically advanced G7 states to record an economic decline this year, Reuters reported. No other G7 country is currently expecting a drop in GDP this year.
However, at the press conference, Habeck looked at the further development of the German economy with optimism. Currently, according to him, the “economic framework conditions” are not satisfactory. “But we will free ourselves from it and work it out,” he added. At the same time, he emphasized that the German economy is struggling with a number of uncertainties, including geopolitical ones, such as the wars in Ukraine and the Gaza Strip.
The German government is preparing measures to support the economy, the so-called growth package. “If it is brought to life, and indeed in its entirety, the economy will grow faster, more people will go to work again,” Habeck said today. The federal government fears that some of the measures of the growth package will be blocked in the Federal Council by the state governments led by the conservative CDU/CSU. At the federal level, the CDU/CSU is in opposition and is preparing for parliamentary elections scheduled for September next year. The Federal Council is a chamber of parliament representing the interests of the individual federal states.
However, according to economic associations, the planned measures of the growth package are not sufficient. The unions demand deeper reforms and complain, among other things, that in international comparison Germany has high energy prices, a heavy bureaucratic burden and an increasing shortage of skilled labor.
Source: www.tyden.cz
