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DIW Berlin Economic Outlook: Global Economy Experiencing Robust Growth; Germany’s Recovery Is Delayed Further

DIW Weekly Report 10/11 / 2023, S. 85-93

Timm Bönke, Guido Baldi, Hella Engerer, Pia Hüttl, Konstantin A. Kholodilin, Frederik Kurcz, Violetta Kuzmova-Anand, Theresa Neef, Laura Pagenhardt, Werner Roeger, Marie Rullière, Jan-Christopher Scherer, Teresa Schildmann, Ruben Staffa, Kristin Trautmann

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Abstract

The German economy will likely contract in the first quarter of 2024 due to still heightened inflation and weak demand, which was already weighing on German economic output in 2023. Inflation, which is falling in both Germany and the euro area overall, is expected to return close to the European Central Bank's two-percent target, suggesting that a turnaround in interest rates can be expected in early summer. Better financing conditions and the slowdown in price momentum are likely to somewhat boost both private consumption as well as corporate investments over the course of 2024. Nevertheless, there is currently still a great deal of uncertainty, particular in regard to the future economic policy environment, which is causing households and companies to remain cautious in Germany. In addition, fiscal policy stimuli as well as foreign demand are lacking. German GDP will virtually stagnate and, carried by private consumption and public investments in equipment, increase more markedly by 1.2 percent in 2025. The global economy will continue to develop more robustly than Germany; it is projected to increase by 3.5 percent in both 2024 and 2025, which should gradually strengthen German exports.

Ruben Staffa

Research Associate in the Macroeconomics Department

Teresa Schildmann

Research Associate in the Macroeconomics Department

Marie Rullière

Research Associate in the Macroeconomics Department

Theresa Neef

Research Associate in the Macroeconomics Department

Jan-Christopher Scherer

Research Associate in the Macroeconomics Department

Pia Hüttl

Research Associate in the Macroeconomics Department

Laura Pagenhardt

Ph.D. Student in the Macroeconomics Department

Guido Baldi

Research Associate in the Macroeconomics Department

Konstantin A. Kholodilin

Research Associate in the Macroeconomics Department

Hella Engerer

Research Associate in the Energy, Transportation, Environment Department



JEL-Classification: E32;E66;F01
Keywords: Business cycle forecast, economic outlook
DOI:
https://doi.org/10.18723/diw_dwr:2024-10-1

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