Robert Habeck, Federal Minister for Economic Affairs and Climate Protection and Vice Chancellor, pictured during the weekly cabinet meeting on February 21, 2024 in Berlin.
Florian Gärtner | Photo library | Getty Images
Germany’s gross domestic product is expected to grow by just 0.2% this year as the country finds itself in “difficult waters,” Federal Economics Minister Robert Habeck said on Wednesday.
The revised GDP growth forecast is below the previous estimate of 1.3%. Habeck said the government now expects German GDP to grow by 1% in 2025.
During a press conference, the minister attributed the revised forecast to an unstable global economic environment and low global trade growth, as well as higher interest rates.
These problems have negatively impacted investments, particularly in the construction industry, he said.
Recent data shows that German housing is one of the sectors most affected. Property developers are canceling projects and the number of orders is falling. Analysts fear the sector could face further trouble this year.
“The economy is in troubled waters,” Habeck said in a statement posted online, according to a CNBC translation. “We are emerging from the crisis more slowly than we had hoped.”
This is despite falling energy costs and falling inflation as well as consumers’ purchasing power increasing again, he said. However, Habeck insisted that Germany had proven resilient despite losing access to Russian shipments of crude oil and oil products by sea as a result of the war in Ukraine.
Budget crisis
The country narrowly avoided a recession in the second half of 2023, although its GDP fell by 0.3% in both the final quarter and the full year of 2023. However, GDP for the third quarter of 2023 has been revised to reflect stagnation. This means that the country has escaped a technical recession characterized by two consecutive quarters of negative growth.
As an additional economic challenge, Habeck pointed to Germany’s recent budget crisis, which has left a 60 billion euro ($65 billion) gap in the government’s financial plans for the coming years.
Last year, the country’s Constitutional Court ruled that it was unlawful for the government to reallocate emergency debt raised but not used during the Covid-19 pandemic into its current budget plans. This caused significant disruption to financial planning and forced the government to make cuts and savings.
The biggest challenge for Germany is the shortage of skilled workers, which will worsen in the coming years, said Habeck in a statement published on Wednesday. He also said that there were various structural problems that needed to be addressed in order to “defend” the competitiveness of Germany as an industrial location.
Habeck also addressed the inflation outlook, saying it is expected to fall to 2.8% over the course of 2024 before returning to the 2% target range in 2025. The harmonized consumer price index for January 2024 was 3.1% on an annual basis.
Source link
2024-02-21 15:16:44
www.cnbc.com
