Previously, the country's economy was predicted to grow 1.3% this year
The German economy is performing extremely poorly and the government will revise its forecast for GDP growth in 2024 to 0.2% annually, compared to the 1.3% previously expected. This was stated by the Minister of Economy and Climate Protection Roberto Habeck Euractiv reports .
In 2023, Germany's GDP decreased by 0.3% compared to 2022, which raised concerns about the deterioration of Europe's largest economy.
Politicians and business leaders had hoped the current year would be marked by more positive prospects, but Habeck's remarks point to a darker picture.
Recently, the publication notes, the economic recession in the country was interpreted by some experts as structural and not temporary. Germany is struggling with higher energy prices and higher corporate taxes than its global competitors. At the same time, companies complain about the growing regulatory and bureaucratic burden.
Although the country has much lower public debt than other G7 countries, the government is divided on whether it should increase it to get out of the current recession.
Recently, Habeck floated the idea of creating a new €30 billion annual fund, financed by public debt, for industrial subsidies in the form of tax incentives similar to the US Inflation Reduction Act (IRA). However, Finance Minister Christian Lindner called for a broader cut in corporate taxes, to be financed by spending cuts.
According to Bloomberg , Habeck cited the November 2023 Constitutional Court ruling as one of the reasons for the GDP drop. The court ruled that the redistribution of 60 billion euros of unused coronavirus funds to the Climate and Transformation Fund (KTF) was unconstitutional. This decision forced the government to reduce the amount of assistance provided to businesses and consumers due to high energy prices.
As Compraço previously reported, inflation in Germany slowed to 2.9% in January 2024 compared to January 2023. In December, the number increased by 3.7% year on year. Thus, inflation in the country reached the lowest level since June 2021 (+2.4%).
