New HWWI Business Cycle Forecast
Following a 0.3 % decline in real gross domestic product in 2023, the Hamburg Institute of International Economics (HWWI) expects only limited recovery potential for the German economy in 2024 and 2025. In view of the difficult start to the year and the resulting depressed starting level, economic growth of only ¼ % on average is expected for 2024, even with a moderate economic upturn over the remainder of the year. However, even this assumes that the geopolitical conflicts do not escalate further. And even then, given the structural problems in Germany, real gross domestic product is only expected to increase by 1 % in 2025. “Against the backdrop of the worsening labor shortage, the potential for future growth will remain limited beyond 2025,” says Prof. Dr. Michael Berlemann, Scientific Director of the HWWI. In his opinion, the greatest opportunities for easing this restriction lie in digitalization, the increased use of artificial intelligence and the automation of activities, both in the corporate sector and in public administration.
By contrast, the price outlook has improved significantly. Inflation has already fallen considerably over the course of 2023. And despite noticeably rising labor costs, which are slowing down the further disinflation process, the rate of increase in the cost of living index is expected to approach the 2 % mark again this year and next, at 2 ¾ % and 2 ¼ % respectively.
This forecast is based on the premise that the geopolitical and therefore also the global economic situation does not deteriorate further and that economic policy decides on suitable measures to improve the domestic framework conditions for the economy.
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Prof. Dr. Michael Berlemann