The DIW economic research institute in Berlin has revised its growth forecast for Germany, citing a rise in private consumption as a key factor in the upturn. Originally, the institute predicted a growth rate of 0.1% for this year, but now it expects the rate to be 0.3%. Looking ahead, the growth rate is expected to accelerate to 1.3% by 2025.
DIW attributes this optimism to the likelihood of households in Germany feeling more income security in the coming months. This is believed to be driven by one-off payments from employers, inflation compensation bonuses, and wage increases that have yet to fully take effect. The institute anticipates that these factors will fuel overall economic activity, with private consumption playing a significant role as the main driver of growth.
According to DIW economic forecaster Geraldine Dany-Knedlik, all signs are pointing to positive growth in private consumption. Additionally, low-income households are expected to have higher incomes at their disposal, further contributing to the overall economic activity in Germany.