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Economic research institutes in Germany have downgraded their GDP forecast, citing reasons such as low domestic demand and high gas and electricity prices affecting exports. These institutes released their six-monthly “collective diagnosis” of the German economy, revising the growth forecast from 1.3% to 0.1%. The report emphasized the importance of consumers’ purchasing power in improving the economic outlook.

Germany’s economic situation was described as ailing, with experts noting a prolonged period of economic weakness and dwindling growth forces. Structural factors and sluggish overall economic development were highlighted as contributing to this weakness. Despite a potential recovery in the spring, the report suggested that the overall momentum might not be significant.

One of the factors impacting the German economy is the lack of increase in domestic demand, partly due to high gas and electricity prices. These prices have caused a loss of competitiveness for energy-intensive goods, which are a strength of Germany’s exports. Additionally, the government’s strict fiscal policy, as a result of provisions for the constitutional debt brake, has limited the issuance of new debt.

Germany’s economy was notably the worst performing major economy in the world last year. The forecast for the following year predicted growth to pick up to 1.4%. The “diagnosis” was a collaborative effort from five leading economic research institutes in Germany: DIW in Berlin, IfW in Kiel, IWH in Halle, RWI in Essen and Ifo in Munich

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