Experts have worsened the forecast of German GDP growth

Five German research institutes have significantly revised their forecast for German GDP growth for the current year, reducing it to 0.1% from the previous 1.3%. This follows from the press release of the IFO, DIW, IfW, IWH and RWI institutes.

According to the report, the institutions revised their forecast downwards by 1.2 percentage points compared to the autumn forecast. The forecast for next year remained unchanged and assumes GDP growth of 1.4% (-0.1 percentage points).

Experts note that the German economy is experiencing difficulties, including a severe phase of market weakness, which is accompanied by a reduction in growth potential. The economic recovery expected after spring will be weak, and its dynamics are predictably low.

Among the factors that influenced the deterioration of the forecast are a reduction in exports, weak price competitiveness in the field of energy-intensive goods, the transfer of production abroad and investor uncertainty. Geopolitical and structural changes, as well as political uncertainty, are also risks to the economy.

As a recommendation, representatives of the institutions propose to reform debt policy and the «debt brake» mechanism (the mechanism for limiting public debt), which caused the budget crisis in Germany at the end of last year.