Economic growth forecast halved

Economy Germany will grow this year by only 0,6 percent, instead of the previously predicted 1,3 percent. This is the forecast of the leaders economic institute, published this Wednesday (April 1).

"The shock with energy prices in the midst of the war in Iran has a hard impact on the economic recovery, but at the same time, the expansive fiscal policy supports the domestic economy and prevents a sharper decline," said Timo Volmersheuser, expert of the ifo institute. writes DW.

For the next year, a reduced growth is also expected - only 0,9 percent, instead of the previously planned 1,4.

No recovery.

This is bad news for Germany, which has been in recession for years and only recorded minor growth last year.

Pricelist energy sources will now prevent recovery, although it too was largely based on epic investments in the military and infrastructure. For those two areas, the government Friedrich Merz (CDU) borrowed a billion euros for the next years.

Analysis by economic experts shows that energy prices will cause inflation, at least temporarily. The price of gas makes fertilizer more expensive, and that spills over into prices of all food in the world is wasted. The cost of transporting goods is also increasing. Price increases then reduce consumption.

Half a year ago, the same economic institutes calculated a growth in consumer prices of 2 percent this year and 2,3 percent in the next year. Now there will be more.

Photo: AP Photo/Ebrahim Noroozi

The minister wants "brave reforms"

Experts are opposed to state interventions in the energy market and instead propose "targeted social measures" that would soften the impact on citizens' pockets.

The Federal Government is expected to lower its own official growth forecast, which has been up to one percent, these days.

Spring forecasts are important, because they indicate what the tax inflows will be. Less growth means less consumption, and less money in the state coffers. And that increases the pressure on the Government to save.

"The message of the spring diagnosis of the research institutes is clear - the conflict in the Middle East increases the pressure on German politics to decisively approach structural reforms," ​​said Economy Minister Katerina Reiche.

He says that "brave reforms" are needed now.

Source: Deutsche Welle (DW)

Real journalism costs money, and we will not be bought by tycoons and corporations. Support us with a one-time or monthly donation. The time for it is now!