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Business Cycle Germany
Economic Policy in Germany
The German economy is leaving the recession behind. According to leading indicators, GDP will continue to rise following the increase in the first quarter. As the year progresses, rising real disposable income and increasing exports will stimulate economic activity. In addition, the effects of tighter monetary policy will gradually fade out. However, there are no signs of strong economic momentum. Despite a moderate upward trend, the business and consumer confidence remain at low levels. Moreover, structural impediments - not least demographic change – are increasingly limiting the scope for expansion. All in all, GDP is expected to grow by 0.2 percent in 2024 (spring forecast: 0.1 percent) and by 1.1 percent in 2025 (spring forecast: 1.2 percent). Although inflation has moderated noticeably and is expected to reach 2.2 percent this year and 1.9 percent in 2025, the core inflation will remain high for the time being. The labor market remains fairly robust. However, employment will increase only slightly due to demographic change. The unemployment rate will remain broadly unchanged and will be 5.8 percent in 2025. The government financing deficit is expected to fall from 2.4 percent relative to GDP in 2023 to 1.2 percent in 2025. The debt level will remain at around 63 percent relative to GDP.
