Germany is particularly weak
OECD: Economy will grow less strongly in 2024
November 29, 2023, 12:09 p.m
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According to a forecast, the economies of the 38 OECD countries will grow by 2.7 percent in the coming year. This is less severe than in 2023. The energy crisis and inflation prevent a larger increase. Things will look up again in this country in 2024, but Germany is still holding back a better overall result.
The industrialized countries organization OECD expects the global economy to grow somewhat weaker next year. After an increase of 2.9 percent this year, an increase of 2.7 percent is expected in 2024, said the Organization for Economic Cooperation and Development (OECD) in Paris. An increase of three percent is expected in 2025, as incomes increase and key interest rates are expected to fall.
According to the OECD forecast, the economy in Germany will grow by 0.6 percent in 2024 and by 1.2 percent in 2025. Only in the neighboring Netherlands is the increase likely to be even lower at 0.5 percent. For comparison: the average growth of the 38 industrial nations united in the OECD is estimated at 1.4 percent. In the coming year, Europe’s largest economy is expected to shrink by 0.1 percent, while the OECD as a whole can expect growth of 1.7 percent.
“The German economy is currently in a difficult phase,” OECD economist Isabell Koske told the Reuters news agency. “The energy crisis hit Germany more than other countries because industry plays a more important role in this country and dependence on Russian gas was much higher than in other countries.” High inflation has also reduced the purchasing power of households and thus affected consumption. “The budget crisis is also unsettling companies and consumers,” said Koske.
Budget crisis is further inhibiting Berlin
With reference to the debt brake, the Federal Constitutional Court has decided that the 60 billion euros originally approved as a Corona loan in the 2021 budget may not be subsequently reallocated for investments in climate protection and the modernization of the economy. It is therefore crucial to “solve the budget crisis as quickly as possible in order to give companies and households planning security and confidence in the future,” said Koske. A solution should include cuts in expenditure, increases in revenue and a reform of the debt brake.
According to the OECD, falling inflation and rising wages will support incomes and private consumption in Germany. However, high interest rates weighed on housing investment and dampened export demand for capital goods from Germany. However, according to OECD estimates, other investments are gradually increasing. Exports are expected to recover slowly as global demand picks up, the OECD forecast said.
Globally, the OECD assumes that growth in emerging economies will be better than in industrialized countries. Growth in Europe will be relatively subdued compared to North America and the major Asian economies. The increase in consumer prices in the leading industrialized and emerging countries (G20 group) will continue to gradually decline. Inflation in most major economies is expected to be back on target by 2025.