BERLIN, Jan. 24 (Xinhua) -- The ifo Institute for Economic Research on Wednesday lowered its 2024 forecast for the German economy, expecting the country's gross domestic product (GDP) to grow by merely 0.7 percent instead of the 0.9 percent predicted last month.
The downward adjustment was based on the austerity measures implemented by the Bundestag in its budget resolution last week, according to ifo. The German government had to cut spending as a result of the failed reallocation of COVID-19 relief funds for climate measures.
The cuts to government spending are to add up to around 19 billion euros (20.7 billion U.S. dollars) this year. "Companies and households will carry a greater burden or receive less relief, and government spending will be cut," said ifo expert Timo Wollmershaeuser in a statement.
To maintain Germany's green transformation despite the savings, the government focused on industries and sectors that are harmful to the climate. Planned subsidy cuts in the agricultural sector sparked farmers' protests throughout the country for weeks.
Even a concession by the government with a partial reversal of the cuts was not enough to stop the protests. "Only when everything has really been negotiated to the end will it be over," said Joachim Rukwied, president of the German Farmers' Association, on Sunday, announcing further protests in the future.
The austerity measures are also directly affecting German consumers who are already burdened by the persistently high inflation. The tax on airline tickets increased and the CO2 price for fuel, natural gas and heating oil was raised from 30 to 45 euros.
The Federation of German Consumer Organizations (vzbv) wants to relieve consumers by returning the revenues from the CO2 price, 11.4 billion euros since its introduction three years ago, to citizens in the form of a "climate payment." The government first spoke of such an idea when it took office in 2021, but has yet to implement it.
Although the CO2 price created an "incentive for climate-friendly behavior," it was also "an additional financial burden for people in addition to the high energy prices," said vzbv board member Ramona Pop.
Germany slipped into recession in 2023, with a contraction of 0.3 percent, according to initial estimates by the Federal Statistical Office (Destatis). With inflation normalizing only slowly, economic activity was subdued by private and public consumption as well as weak export demand.
Europe's largest economy did not continue its recovery from the sharp economic slump experienced in the pandemic year of 2020, Destatis president Ruth Brand said while summing up last year's development. (1 euro = 1.09 U.S. dollar) ■
