Photo shows German Minister for Economic Affairs and Climate Protection and Deputy Chancellor Robert Habeck during the weekly cabinet meeting on February 21, 2024 in Berlin, Germany.
Florian Gartner | Photography Library | Getty Images
German Economy Minister Robert Habeck said on Wednesday that Germany’s gross domestic product is expected to grow by just 0.2% this year as the country finds itself in “tricky waters.”
The revised GDP growth forecast is lower than the previous forecast of 1.3%. Habeck said the government currently expects German GDP to grow by 1% in 2025.
Speaking at a press conference, the minister attributed the revised forecast to an unstable global economic environment, slow growth in world trade and rising interest rates.
He said these issues had a negative impact on investment, particularly in the construction industry.
Latest data shows that Germany’s housebuilding industry is one of the worst-affected sectors, with developers canceling projects and order numbers falling. Analysts worry the industry could face further difficulties this year.
“The economy is in a difficult predicament,” Habeck said in a statement. online, according to a CNBC translation. “We are emerging from the crisis slower than we would like.”
He said this was despite falling energy costs and inflation and a renewed increase in consumer spending power. Nonetheless, Habeck insisted that Germany had shown resilience despite losing Russian seaborne supplies of crude oil and petroleum products due to the war in Ukraine.
budget crisis
The country narrowly avoided recession in the second half of 2023, although GDP fell by 0.3% in the final quarter and for all of 2023. However, Q3 2023 GDP was revised to reflect the economic stagnation. This means the country has avoided a technical recession, which was characterized by two consecutive quarters of negative growth.
Habeck pointed to Germany’s recent The budget crisis has left a 60 billion euro ($65 billion) hole in the government’s financial plans for the next few years, posing an additional economic challenge.
Last year, the country’s Constitutional Court ruled that it was illegal for the government to reallocate emergency debt taken on but unused during the Covid-19 pandemic to the current budget plan. This has caused serious disruptions to financial planning and forced governments to make cuts and savings.
In a speech delivered on Wednesday, Habeck said the biggest challenge facing Germany is a lack of skilled workers, which will only intensify in the coming years. He also said that in order to “defend” Germany’s competitiveness as an industrial center, various structural problems need to be solved.
Habeck also talked about the outlook for inflation, saying he expects inflation to fall to 2.8% for the full year of 2024 before returning to the 2% target range again in 2025. The unified consumer price index in January 2024 was 3.1% on an annual basis.
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