The Ifo Institute upgraded its growth forecasts for German economy, indicating that it is “slowly working its way out of the crisis.” GDP is now expected to grow by 0.4% in 2024, up from March forecast of 0.2%. Growth is projected to further accelerate to 1.5% in 2025, maintaining the previous forecast. Inflation is expected to decrease significantly, from 5.9% in 2023 to 2.2% in 2024, and further down to 1.7% in 2025.
The institute anticipates that the overall economic recovery will gain momentum throughout the rest of the year as consumer spending normalizes. Purchasing power of private households is expected to strengthen, leading to a gradual recovery in the demand for goods and services.
Moreover, the Ifo Institute expects ECB’s interest rate cut in June is likely to be followed by two more cuts this year. These lower interest rates, coupled with a stable labor market and robust income growth, are expected to boost the consumer economy and aid in the gradual recovery of the construction sector.
Full Ifo release here.
