The Munich-based Ifo Economic Research Institute expects zero growth for the German economy this year, which today revised its previous estimate of 0.4% growth.

In its statement today, the institute “also revised its forecast for 2025 from 1.5% to 0.9%. “The German economy is stuck and languishing in recession, while in other countries a recovery is being felt. We have a structural crisis. There is little investment, especially in manufacturing, and productivity has been stagnant for years. We also have an economic crisis, with the order situation being unfavourable. The increase in purchasing power is not leading to an increase in consumption, but instead to more saving, because people are upset,” explained Ifo’s head of forecasting Timo Vollmershoyer.

The savings rate is now 11.3%, significantly higher than the 10.1% average a decade before the pandemic. At the same time, the rate of inflation will fall from 5.9% in 2023 to 2.2% this year and then moderate to 2.0% and 1.9% for each of the next two years. The unemployment rate will rise from 5.7% last year to 6.0% this year and then fall to 5.8% and finally to 5.3% in two years. The national budget deficit is likely to reach 2.0% of economic output in 2024 and fall to 1.3% and 0.9% in 2025 and 2026 respectively.

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