German central bank reduces growth forecast for 2024

The German central bank has significantly reduced its growth forecast for Europe's largest economy for next year, while saying it is slightly less pessimistic about the current year, reported dpa.

The Frankfurt-based Bundesbank on Friday reduced its estimate for growth in 2024 from 1.2% to 0.4%.

For 2023, it expects economic output, or gross domestic product (GDP), to shrink by 0.1%.

In the previous forecast from June, a decline of 0.3% was expected.

"The German economy will recover in the coming years," the Bundesbank said.

In the medium term, it expects slightly stronger growth of 1.2% in 2025 and 1.3% in 2026. However, the economic recovery will be somewhat delayed, according to the short-term outlook.

At present, weak foreign demand is the main factor holding back growth. In addition, private consumption is hesitant and higher financing costs are dampening investment.

However, the picture will soon brighten: "From the beginning of 2024, the German economy should return to a path of expansion and gradually pick up speed," said Bundesbank President Joachim Nagel.

Inflation is also showing signs of improvement: The inflation rate will more than halve in 2024 compared to this year.

"Inflation in Germany is on the retreat, but it is still too early to sound the all-clear," Nagel qualified.

Specifically, the Bundesbank expects an inflation rate according to the European method, the harmonized index of consumer prices (HICP), of 6.1% this year and 2.7% next year. In the June forecast, the rates had been 6 and 3.1%.