Market Analysis

The German economy is projected to stagnate this year, with the Ifo Institute revising its earlier growth forecast from 0.4% to a standstill.

Timo Wollmershaeuser, head of economic research at Ifo, described the situation as the German economy being "stuck and drifting in the doldrums," while other nations are experiencing growth.

Ifo's updated forecasts now predict a 0.9% growth for the economy in the next year, a downgrade from the previously anticipated 1.5%. For 2026, GDP is expected to increase by 1.5%.

Inflation has been decreasing this year and is projected to fall to 2.2%, down from 5.9% last year. It is expected to continue its decline, reaching 2.0% in 2025 and 1.9% in 2026.

Despite the easing inflation, consumer spending is anticipated to remain subdued. The Ifo Institute notes that the current order situation is weak and gains in purchasing power are leading to higher savings rather than increased consumption, as people remain uncertain.

The savings rate has risen to 11.3%, above the pre-pandemic 10-year average of 10.1%.

Unemployment is expected to increase due to economic challenges, rising to 6.0% in 2024 from 5.7% in 2023. It is forecasted to decrease slightly to 5.8% in 2025 and reach 5.3% by 2026.

Paraphrasing text from "Reuters" all rights reserved by the original author.