The German government downgraded its economic growth projections for 2023 and beyond in its revised autumn forecast published on Wednesday, October 11th, pointing to a slower recovery after the country officially entered recession earlier this year, Euractive reported.
Whereas Berlin’s spring projection predicted a mild growth of 0.4%, the government now anticipates that the German economy will instead contract by the same amount—a 0.8-point revision. At the same time, Germany updated its forecast for 2024 as well, anticipating only 1.3% growth instead of the previously forecast 1.6%, and only 1.5% in 2025.
Germany’s Green Party Economy Minister Robert Habeck previously accused anyone who questioned the official figures of “bad-mouthing.” However, the government’s downward revision for the economy is now expected as several independent forecasters have come forward with similar numbers for Germany in recent days.
On Tuesday, October 10th, the International Monetary Fund (IMF) predicted a 0.5% decrease in Germany’s economic growth, while a group of leading economic think tanks in the country floated a 0.6% contraction last month.
“We’re recovering more slowly from the crisis than expected in a difficult geopolitical situation,” Habeck commented on Wednesday, before blaming Putin and the ECB:
What we’re experiencing in 2023 still ultimately goes back to Vladimir Putin’s attack: the high energy prices due to the lack of Russian gas disrupted global market relations and high inflation, which is being tackled by the ECB with high interest rates.
On a positive note, Berlin expects inflation to be gradually reduced from an average of 6.1% this year to 2.6% in 2024 and 2% in 2025.
The economic situation is also driving a wedge between the German government’s coalition partners, which all saw their popularity dwindle in recent regional elections and are now scrambling to offer solutions.
While Habeck and the Greens have been saying that the government was solving the crisis “at an unprecedented speed,” Finance Minister Christian Lindner—leader of the liberal FDP, the smallest coalition member—recently warned that the current measures were insufficient to “find new sources of wealth.”
For a short-term solution, the Greens are still pushing for a multi-billion-euro electricity subsidy scheme to prop up the German industry’s most energy-intensive companies. However, half of Chancellor Scholz’s Social Democrats (SPD) are reluctant to agree for fear of reducing incentives for businesses to innovate as well as potentially putting Berlin on a direct collision course with Brussels, which is against any unfair distortions of the EU’s internal market.
Regardless, the subsidies are still on the table, with a “fifty-fifty” chance of being approved, Habeck said on Wednesday.
