Germany’s economy is showing signs of recovery from two weak years, thanks to rising private consumption and increased exports in the second half of the year, according to the Bundesbank. Private households are benefiting from higher wages, decreasing inflation, and a stable labor market, as per the central bank’s latest economic forecast.
In Q1 of 2024, Germany experienced minimal growth of 0.25%, mainly driven by exports and an uptick in construction investment. However, the Bundesbank anticipates a modest growth of 0.3% for the entire year of 2024, down from the previously projected 0.4% in December. In the medium term, economists at the central bank foresee stronger growth rates of 1.1% in 2025 and 1.4% in 2026.
Germany’s inflation rate is on a downward trend but at a slower pace than expected. The Bundesbank forecasts inflation of 2.8% for this year and 2.7% for 2025 based on the Harmonized Index of Consumer Prices (HICP). These figures are slightly higher than previously estimated due to energy and food prices increasing despite price cuts for these items during the yearly shopping season. Energy and food prices are expected to decrease this year but inflation is persisting particularly in services such as housing, transportation, healthcare and insurance services which have shown little or no change in their prices over time.”
