The German economy, in crisis - EC: It is expected to perform worse than the Eurozone until 2026
The German economy will continue to underperform compared to average growth in the eurozone until 2026, European Commission forecasts showed.
The autumn forecast shows GDP growth in 2024 at 0.8% in the euro area, while a 0.1% GDP contraction is expected in Germany.
"Elevated uncertainty has weighed on consumption and investment, while the outlook for trade has worsened as global demand for industrial goods has weakened," the EU said in the report.
Germany, the world's third-largest economy, has lagged behind the European Union average since 2021 and is expected to contract for a second year in a row in 2024, making it the worst performer among the wealthy G7 democracies.
Going forward, domestic demand in Germany will increase, driven by rising real wages. For next year, the European Commission expects a recovery, with growth of 0.7%, reducing the spring forecast of an expansion of 1.0%. German growth will accelerate to 1.3% in 2026, but will still be below the eurozone average of 1.6%.
Overall, domestic demand is projected to become the main driver of economic growth again in 2025 and 2026. With further easing of inflation expected, real household incomes will continue to recover and private consumption is expected to continue to grow, albeit with a slowing of the pace.
German harmonized inflation fell to 2.4% in October 2024, from a peak of 11.6% in October 2022, mainly due to falling energy prices. For 2024, inflation is expected to average 2.4%. Going forward, inflation is expected to fall to 2.1% in 2025 and 1.9% in 2026, according to the European Commission.
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