German economy: Ifo Institute lowers growth forecast for 2024

The Munich-based ifo Institute has revised its economic forecast downwards due to remaining investments and a weak order situation. According to the autumn forecast now available, gross domestic product is expected to stagnate this year at the 2023 level. “The German economy is stuck,” while “other countries are feeling the upswing,” said ifo economic chief Timo Wollmershäuser.

In June, the institute had expected growth of 0.4 percent. The forecast for 2025 was also lowered – from 1.5 to 0.9 percent. Ifo only expects a stronger increase of 1.5 percent for 2026.

“We have a structural crisis”

“We have a structural crisis,” said Wollmershäuser. “There is too little investment, especially in industry, and productivity has been increasing at a standstill for years.” Climate change, digitalization, demographics, Corona, energy prices and China's new role in the global economy are putting established business models under pressure.

“We also have an economic crisis. The order situation is poor and the increase in purchasing power is not leading to increased consumption but to higher savings because people are uncertain,” says Wollmershäuser. The construction industry is expected to shrink by 3.1 percent this year and industry by 2.0 percent.

The population is changing faster, and fewer and fewer people are in work. “Shifts from the industrial to the service sector mainly explain the stagnation in productivity in recent years,” adds Wollmershäuser.

However, the inflation rate is showing a positive trend: it is falling from 5.9 percent last year to 2.2 percent this year and 2.0 percent next year. The state budget deficit is expected to reach 2.0 percent of economic output this year and fall to 1.3 percent next year.