The German Institute for Economic Research (DIW) has revised its economic forecast for the current year downwards. Instead of a slight growth in gross domestic product of 0.4 percent, the economic researchers now expect stagnation of zero percent. “The hoped-for recovery in industry that we had at the beginning of the year has not materialized,” said DIW economic chief Geraldine Dany-Knedlik.
“Private consumption has also been weaker than we initially expected.” Consumers continue to prefer to put their money aside rather than spend it. The current savings rate is 10.8 percent.
Three leading economic research institutes had already significantly reduced their forecasts. The Munich-based Ifo Institute and the Leibniz Institute for Economic Research in Halle (IWH) also expect zero economic growth for this year, while the Leibniz Institute for Economic Research in Essen (RWI) expects 0.1 percent.
However, the economic upturn has not been canceled, but only postponed, stressed Dany-Knedlik. The DIW is already expecting growth of 0.9 percent for next year and 1.4 percent for 2026.
Consumption in particular is likely to pick up again
The main driver of this delayed economic recovery will be consumption. Economic researchers attribute this primarily to the significant increase in real wages, particularly in the public sector and in the metal and electrical industries. “This should support private consumption,” they said.
There are also positive signals in foreign trade and investments as a result of the interest rate turnaround that the European Central Bank initiated in June. “However, German exports are likely to be driven more by services in the IT sector or travel in the future,” the DIW said.
Global economic risks remain, such as the re-election of Donald Trump as US president or a further escalation of the wars in Ukraine or the Middle East. “Home-grown problems could also hit the economy hard,” it said. One risk factor is the rise of the AfD.
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