Top of German industry: BDI Managing Director Tanja Gönner and BDI President Siegfried Russwurm. Picture Alliance
The German economy is starting the new year with cautious hope of a trend reversal to mini-growth.
The Federation of German Industries (BDI) expects economic growth of 0.3 percent for 2024. In 2023, the German economy shrank by 0.3 percent.
The ZEW economic barometer also rose again. The expectations of the financial experts surveyed are now clearly positive at 15.2 points.
In a phase of perceived decline, even standing still seems like a departure. From an optimistic perspective, this is how German industry’s forecast for the economy can be assessed. For 2024, the Federation of German Industries (BDI) expects a turnaround to small economic growth of 0.3 percent. Last year the gross domestic product shrank by 0.3 percent.
However, Germany is still lagging behind the global economy. Globally, the BDI expects growth of 2.9 percent in 2024. “The economy in Germany is at a standstill. Compared to most other large industrialized countries, our country is falling further behind,” said BDI President Siegfried Russwurm on Tuesday in Berlin. “We don’t see any chance of a quick liberation in 2024.”
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The BDI economists base their confidence primarily on rising incomes and purchasing power. This could boost private consumption. There are significant wage and salary increases in many industries. In addition, there is an increase in social transfers such as citizens’ money. Due to the decline in inflation, this also affects the purchasing power of income. The prospect of gradual interest rate cuts by central banks gives hope. However, they would only have noticeable effects on the economy from spring 2025. When interest rates are lower, loans become cheaper and investments become more profitable for companies.
Russwurm warned about the Ministry of Economic Affairs’ outstanding power plant strategy. As long as the construction of planned back-up power plants does not get underway because business models and financing are unclear, Germany will remain dependent on the continued operation of coal-fired power plants, despite all its ambitions in terms of climate protection.
New gas power plants are supposed to step in during “dark lulls” – when there is no wind and no sun shining – to meet electricity demand. They will initially be operated with natural gas and later with hydrogen produced in a climate-neutral manner. Energy companies are shying away from investing because the new power plants have not yet paid off.
Economy 2024: Financial experts more optimistic
Positive signals of a gradual economic recovery also came from an important leading indicator for the economy. The ZEW economic expectations will rise slightly again in January 2024. “At plus 15.2 points, they are 2.4 points above the value from December 2023,” said Das Center for European Economic Research (ZEW).
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“The economic expectations for Germany have increased again. This is due to the fact that more than half of those surveyed now assume that the ECB will cut interest rates in the first half of the year,” said ZEW President Achim Wambach. In the USA, more than two thirds of those surveyed expect the US Federal Reserve to cut interest rates in the next six months.
The ZEW regularly surveys financial market experts for its barometer. While the outlook brightened somewhat, the assessment of the current economic situation remained almost unchanged at minus 77.3 points.
With material from dpa.
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