Germany’s economy is on a slow but steady path to recovery, driven by factors like dropping energy prices and a more flexible monetary policy, according to the IMF. Real wages have outpaced inflation, leading to a boost in personal consumption growth. However, the IMF predicts that GDP growth will remain below 1% in 2024 unless there is a significant increase in productivity or immigration.
Various factors contribute to this recovery, including increased consumer spending, rising wages, and manageable price pressures. The inflation rate is expected to decrease from 5.9% in 2023 to 1.7% by 2025, while the labor market remains strong with gradual rises in employment levels.
Despite fiscal policies remaining tight and some economic challenges, the German economy is projected to stabilize with a decrease in the public financing deficit. However, geopolitical tensions and fragile global real estate markets pose potential downsides.
The Kiel Institute highlights the importance of structural reforms to address issues like skilled labor shortages and demographic changes. Balancing upside potentials with downside risks will be crucial for Germany’s economic future.