Germany cut its economic growth forecast for 2024

Recently, based on the forecasts of several authoritative institutions and economic organizations, including the German Council of Economic Advisers and the Organization for Economic Cooperation and Development (OECD), they have revised down Germany's economic growth forecast for 2024.

Specifically, the German Council of Economic Advisers announced on May 15, 2024 that it had lowered its forecast for German economic growth in 2024 to 0.2% from the 0.7% forecast last fall. The decline was mainly influenced by weak overall demand, with private household consumption remaining cautious and new orders in the industrial and construction sectors rising only modestly.

The Organization for Economic Cooperation and Development (OECD) also recently cut its forecast for German economic growth in 2024 to 0.2 percent, down from a previous forecast of 0.3 percent in February. The OECD cited uncertainty over tax incentives for "green" investment and high interest rates that discourage investment in areas such as the housing market as major obstacles to growth.

These lower growth forecasts reflect some of the current economic challenges facing Germany, including slow global economic growth, structural problems in Germany, the energy crisis, and shortages in the labor market. So what has caused the downgrade in Germany's growth forecast? The author analyzes the following factors.

First, slow global economic growth and a ruling by the German Constitutional Court have led to a gap in the German budget, which is one of the important factors affecting German economic growth. At the same time, the German economy is plagued by domestic structural problems, such as abandoning nuclear power and focusing too strictly on decisions to balance the budget, which also affect growth.

Second, supply bottlenecks have also contributed to the downward revision of Germany's economic growth forecasts. The impact of COVID-19 on global supply chains is continuing, with companies facing raw material shortages and rising prices. At the same time, demand for automobiles, electronic products, packaging materials and other strong growth, resulting in production unable to meet the demand for orders. In addition, factory fires, Suez Canal shipping blockages and other incidents have further exacerbated the supply bottleneck.

Again, the export business is restricted is also one of the factors affecting the German economic growth. In particular, trade in goods with China is still restricted, which has a certain impact on Germany's export business. Although the world economy is still on the track of recovery, the export growth momentum will not be too strong.

In addition, the limited growth of private consumption is also leading to Germany's economic growth forecast is one of the reasons. Although German households are saving at a record high, this has not led to much growth in private consumption. This may have something to do with the consumption and savings habits of German society.

Finally, the energy crisis and its effects have also been one of the challenges facing German economic growth. Continued high inflation, triggered by high energy prices after the escalation of the Ukraine crisis, has had a negative impact on the German economy. Germany's auto, machinery and chemical manufacturing industries, the backbone of its economy, are more vulnerable to the impact of higher energy prices on industrial production and investment and financing.

In summary, the reasons for the downward revision of the German economic growth forecast include slow global economic growth, domestic structural problems, supply bottlenecks, export constraints, limited private consumption growth, and energy crises. The combination of these factors has led to lower growth forecasts for Germany. However, some industry analysts said that although Germany's economic growth expectations have been lowered, they still show some resilience and potential. The German government and businesses should actively respond to the current economic challenges and promote economic stability and sustainable development.