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IMF cuts growth outlook for Germany

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IMF cuts growth outlook for Germany

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The International Monetary Fund has adjusted its growth forecast for the largest economy in the eurozone, Germany, by 0.3 percentage points. This year, the German economy is expected to exhibit the slowest growth among all G7 nations.

The International Monetary Fund (IMF) announced on Tuesday that Germany’s economy is anticipated to grow less than previously expected this year. It revised its growth projection for Germany to 0.2%, which is 0.3 percentage points lower than its estimate in January.

In terms of the broader eurozone, the IMF highlighted that Germany is poised to have the weakest growth among the G7 industrialized nations.

Looking ahead to 2025, the IMF forecasts a growth rate of 1.3% for the German economy. The report underscored structural challenges such as a declining working-age population and investment barriers as significant issues.

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Additionally, the IMF adjusted its outlook for France, the second-largest economy in the eurozone, reducing its forecast from 1% to 0.7%.

“In the euro area, growth will pick up this year, but from very low levels, as the trailing effects of tight monetary policy and past energy costs, as well as planned fiscal consolidation, weigh on activity,” the IMF said in its report.

“Stronger household consumption, as the effects of the shock to energy prices subside and a fall in inflation supports growth in real income, is expected to drive the recovery,” it added.

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BNP Paribas economist Stephane Colliac told the Agence France-Presse news agency that Germany was being impacted by increasing competition from China, the transition to a green economy and the rise of energy costs following Russia’s invasion of Ukraine.

Also on Tuesday, Chancellor Olaf Scholz was in Beijing for talks after he called for “fair competition” with China.

The International Monetary Fund (IMF) has stated that the global economy will not experience a recession this year.

The IMF projects that global inflation will average 5.9% in 2024, which is 0.1 percentage points higher than the January forecast. In 2025, inflation is expected to reach 4.5%, with industrialized states experiencing a lower rate of 2%.

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However, the IMF cautioned that escalating geopolitical tensions could disrupt supply chains, potentially leading to reduced growth and higher inflation.

Despite facing Western sanctions, the IMF has upgraded its forecast for Russia’s economy, the fifth-largest in Europe. Previously predicting 2.6% growth in January, it now anticipates 3.2% growth. For 2025, Russia’s growth is projected to be 1.8%.

Analysts attribute Russia’s economic performance to increased military spending, which has bolstered production following the onset of its conflict in Ukraine. Additionally, social transfers have contributed to a rise in consumption within the country.

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