Ifo lowers German growth forecast amid budget cutbacks

Experts are predicting lower growth in the German economy as the government slashes spending.

The Germany economy is ailing

Germany’s gross domestic product is likely to grow by just 0.7% in 2024, down from a previous forecast of 0.9%, the Institute for Economic Research (Ifo), a Munich-based economic think tank said on Wednesday.

Ifo revised its mid-December estimate in view of the drastic cuts in the German government’s 2024 budget amid a funding shortfall.

Last year, Europe’s largest economy shrank by 0.3%.

What did Ifo say?

“According to our estimate, the federal budget now agreed by the Budget Committee made cutbacks to the tune of some €19 billion ($20.6 billion),” Ifo senior economist Timo Wollmershäuser said.

“Businesses and households will come under more strain or receive less relief, and public spending will be reduced,” he said.

He said that when Ifo made its last prediction in December, it was not clear to what extent spending would be reduced or taxes raised.

The German government was forced to trim back its spending after the constitutional court ruled in November that €60 billion ($64 billion) in unused COVID-era loans could not be reallocated.

Ifo is more optimistic in its forecast than, for example, the Macroeconomic Policy Institute (IMK), which has predicted that the GDP will shrink by 0.3% in 2024.

tj/sms (Reuters, dpa)

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