Bundesbank cuts German GDP forecasts for 2024 and 2025

(Sharecast News) - Germany's central bank scaled back its growth projections on Friday, forecasting a meagre rebound in economic activity after a contraction in 2023. The Bundesbank said calendar-adjusted real gross domestic product would increase by just 0.4% in 2024 following a 0.1% decline this year. That's down from an earlier prediction in June that pencilled in 1.2% growth next year.

Looking ahead to 2025, the monetary authority is now estimating 1.2% growth in 2025, below the previous forecast of 1.3%, picking up to 1.3% in 2026.

The Bundesbank said the economic recovery was "subject to some time lag" with weak foreign demand weighing heavily on industry, while private consumption remains "restrained" and high interest rates dampen investment.

"As from the beginning of 2024, the German economy is likely to return to an expansion path and gradually pick up speed," said Bundesbank president Joachim Nagel in a statement.

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

The harmonised index of consumer prices is expected to fall from an annual rate of 6.1% in 2023 to just 2.7% in 2024, with energy and food price inflation slowing considerably.

This easing in price pressures, along with strong wage growth - owing to a stable labour market - should see real household incomes rise "significantly" in the coming years, Nagel said.