The Ifo Institute has slightly increased its economic forecast for Germany in 2024. It is now assuming growth of 1.7 percent in the coming year, as announced in Berlin on Wednesday. That is 0.1 percentage points more than the forecast in December.

According to Munich economic researchers, the inflation rate will then “normalize” again at 2.2 percent. Expectations regarding the budget gap have also improved.

For the current year, however, the expectations look much worse: instead of growth, the Ifo expects a 0.1 percent contraction and thus confirms its December forecast. However, the turning point will come in the course of the year: “After a further decline in gross domestic product by 0.2 percent in the first quarter, the economy will recover over the course of the year,” said Ifo economic researcher Timo Wollmershäuser. “By the middle of the year at the latest, rising real wages will support the domestic economy.”

Gradually falling inflation rates

In addition to noticeable collective wage increases, gradually falling inflation rates should also contribute to this. “Inflation has peaked,” said Wollmershäuser. On average for 2023, he still expects a value of 6.2 percent. This is minimally less than the December forecast.

The Ifo is more optimistic about the state budget than three months ago. In the current and next year, it will be in the red with 1.3 and 0.3 percent of economic output, respectively. In December, the Munich forecast was still 2.6 and 1.2 percent. Among other things, the economic researchers are now expecting 35 billion euros less expenditure on government energy price brakes due to lower prices.