From 0.2 to 0.3 percent
Government raises growth forecast only slightly
April 24, 2024, 2:22 p.m
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0.1 percentage point more than expected in February – there is not enough optimism in the Ministry of Economic Affairs’ spring forecast. The government now expects GDP to increase by 0.3 percent. Only structural reforms could trigger larger surges, according to Habeck’s house.
The federal government is slightly raising its growth forecast for the current year. In its spring forecast, it expects gross domestic product (GDP) to grow by 0.3 percent compared to the previous year, which is 0.1 percentage points more than in the annual economic report from February, as Federal Minister of Economics Robert Habeck announced. Structural changes are necessary for higher growth rates, he warned.
“We are revising our economic expectations for the current year slightly upwards,” explained Habeck. The reason is “signs of a slight economic improvement” over the course of the year. Since the beginning of the year, production has been “noticeably improving” due to significantly lower energy prices, explained Habeck. Inflation continues to decline along with energy prices. This strengthens people’s purchasing power and supports the recovery of private consumption. The government expects an inflation rate of 2.4 percent this year.
The government expects growth of 1.0 percent for the coming year. According to their estimates, the inflation rate will be 1.8 percent in 2025. The export economy is not expected to increase noticeably again until 2025, by 3.1 percent. In 2024 there should be a decline of 0.6 (2023: minus 2.2) percent. The picture is similar for the construction industry. The government made up of the SPD, Greens and FDP is expecting a decline in fixed investment of 1.8 (2023: minus 2.7) percent this year. In 2025 there should be growth again with a plus of 0.7 percent.
Habeck: Need work incentives
“Despite these signs of hope, I am still concerned about the location’s structural problems,” explained the Economics Minister. “If we want to achieve higher growth again in the medium and long term, we need structural changes.” This included strengthening innovation and reducing unnecessary bureaucracy, but also work incentives “so that more people voluntarily work more and longer.”
Business associations have been calling for significant relief for companies for a long time. Habeck had also already spoken out in favor of a growth package. A twelve-point paper from the FDP caused a stir with calls for relief for the economy and restrictions on the welfare state. This met with strong criticism, especially from the SPD.