BERLIN, Dec. 14 (Xinhua) -- Just one day after the German government announced massive savings in order to deal with its budget crisis, leading economic institutes in the country on Thursday lowered their forecasts for the coming year.
The 2024 budget is missing 17 billion euros (18.53 billion U.S. dollars) due to the failed reallocation of COVID-19 relief funds for climate protection measures, after a court ruling last month.
"Uncertainty is currently delaying the recovery, as it increases consumers' propensity to save," said Timo Wollmershaeuser from the ifo Institute for Economic Research.
Following a slight recession in 2023, the ifo Institute expects the German economy to grow by just 0.9 percent next year, instead of the previously estimated 1.4 percent.
However, the institute stressed that "the course for recovery has essentially been set in the forecast period." Inflation has continued to decline, leading to a cut in European key interest rates in the summer, and an increase in purchasing power.
The German Institute for Economic Research (DIW Berlin) and the RWI Leibniz Institute for Economic Research also expect the German economy to grow slightly, by 0.6 and 0.8 percent respectively, in 2024.
"In order for the German economy to grow again next year, private consumption in particular must recover," said RWI head of economic research Torsten Schmidt on Thursday. "This can only succeed if consumer demand rises along with real disposable income."
Real wages in Germany began to rise again in the spring, before picking up to 0.6 percent growth year-on-year in the third quarter, according to official data.
However, consumption is subdued this year due to high price increases, particularly for food. Many major fashion brands and department stores, including Galeria Karstadt Kaufhof, are facing insolvencies and store closures.
At the same time, foreign demand for products from German manufacturers has also collapsed in recent months. According to DIW Berlin, demand will "remain ailing" next year. Exports are expected to contribute 0.2 percentage points to economic growth, but are "not a great ray of hope."
The German Economic Institute (IW) predicts that the country will slide deeper into recession in 2024. As a result of budget cuts, stagnating industry and a construction crisis, gross domestic product is set to fall by 0.5 percent, IW said. (1 euro = 1.09 U.S. dollar) ■
