BERLIN (Reuters) – The German economy is expected to stagnate this year, the Ifo institute said on Thursday, cutting its previous forecast of 0.4% growth.
“The German economy is stuck and is bobbing around in the doldrums, while other countries are feeling the upswing,” said Ifo head of economic research Timo Wollmershaeuser.
In its updated forecasts, Ifo said it expects the economy to grow by 0.9% next year, lower than the 1.5% previously forecast.
In 2026, gross domestic product is likely to increase by 1.5%, according to the economic institute.
Inflation has continued to fall this year and is expected at 2.2%, down from 5.9% in the previous year. It will continue its downward trajectory, falling to 2.0% in 2025 and 1.9% in 2026, according to Ifo’s forecasts.
Despite easing inflation, consumption will remain weak, according to the economic institute.
“The order situation is poor and the gains in purchasing power are not leading to increased consumption, but to higher savings because people are insecure,” Wollmershaeuser said.
The savings rate is now at 11.3%, significantly higher than the 10-year average of 10.1% before the pandemic.
Unemployment is likely to go up due to the economic weakness, rising to 6.0% in 2024 from 5.7% in 2023. It will then fall to 5.8% next year and reach 5.3% in 2026, Ifo said.
