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IMF cuts growth outlook for Germany

April 16, 2024

The International Monetary Fund has revised its growth outlook for the eurozone's biggest economy by 0.3 percentage points. The German economy is predicted to be the slowest-growing of all G7 states this year.

IMF chief economist Pierre-Olivier Gourinchas
The IMF has reduced its growth forecast for the eurozone's two largest economies, Germany and FranceImage: Mandel Ngan/AFP

Germany's economy will grow less than expected this year, the International Monetary Fund (IMF) said on Tuesday.

It said it expected the German economy to grow by 0.2%, which is 0.3 percentage points less than it estimated in its January outlook.

What did the IMF say about growth in Germany and the eurozone?

According to the figures, Germany is expected to have the weakest growth of any state belonging to the G7 group of industrialized countries.

For 2025, the organization expects the German economy to grow by 1.3%. 

The report cited structural problems such as the decline in the working population and obstacles to investment as major concerns.

The IMF also revised its outlook for the second-largest economy in the eurozone, with its forecast for France dropping from 1% to 0.7%.

"In the euro area, growth will pick up this year, but from very low levels, as the trailing effects of tight monetary policy and past energy costs, as well as planned fiscal consolidation, weigh on activity," the IMF said in its report.

"Stronger household consumption, as the effects of the shock to energy prices subside and a fall in inflation supports growth in real income, is expected to drive the recovery," it added.

BNP Paribas economist Stephane Colliac told the Agence France-Presse news agency that Germany was being impacted by increasing competition from China, the transition to a green economy and the rise of energy costs following Russia’s invasion of Ukraine. 

Also on Tuesday, Chancellor Olaf Scholz was in Beijing for talks after he called for "fair competition" with China.

World won't see recession; Russia doing better than expected

The fund said the world will not undergo a recession this year.

The IMF expects global inflation to average 5.9% in 2024, 0.1 percentage points higher than forecasted in January.

Inflation is expected to be 4.5% in 2025, with a rate of only 2% in industrialized states.

The IMF warned that increasing geopolitical fragmentation could disrupt supply chains, leading to lower growth and higher inflation.

The fund also revised upwards its forecast for Europe’s fifth-largest economy, that of Russia, in spite of Western sanctions.

It had predicted 2.6% growth for Russia in January and now foresees 3.2%. Its growth in 2025 is expected to be 1.8%.

Experts have pointed to Russian military spending, which has helped boost production since Moscow launched its war in Ukraine. Social transfers have also led to an increase in consumption

sdi/sms (AFP, dpa)

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