The EU predicts that the German economy will underperform the euro zone until 2026
The German economy is projected to significantly underperform the average growth in the euro zone until 2026, according to the European Commission's latest forecasts released on Friday.
The Autumn Forecast for 2024 estimates GDP growth of 0.8% across the euro area, while Germany is expected to experience a 0.1% contraction, a downward revision from the 0.1% growth projected earlier.
The EU report attributes this slowdown to high uncertainty, which has dampened consumption and investment, and worsened trade prospects due to reduced global demand for industrial goods.
Since 2021, Germany, the world's third-largest economy, has consistently lagged behind the EU average, and is set to face a second consecutive year of contraction in 2024, making it the weakest performer among the G7 advanced economies.
Looking ahead, the European Commission expects a modest recovery in Germany, with GDP growth of 0.7% in 2025, revised down from the 1.0% growth previously forecast. Growth is expected to further improve to 1.3% in 2026, though it will still fall short of the euro zone's average of 1.6%.
Domestic demand is expected to become the main driver of economic growth in 2025 and 2026, bolstered by increasing real wages, easing inflation, and recovering household incomes. However, private consumption is anticipated to rise gradually.
Inflation in Germany is forecast to decline to 2.4% in October 2024, a significant drop from its peak of 11.6% in October 2022, mainly due to lower energy prices. For 2024, the overall inflation rate is projected at 2.4%, with 2.1% inflation expected in 2025 and 1.9% in 2026.
Paraphrasing text from "Reuters" all rights reserved by the original author.