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KfW Research

KfW Business Cycle Compass

Slow growth after a difficult winter

Despite the difficult winter, we maintain our expectation that the German economy will grow moderately again in all of 2024. However, we have revised our GDP forecast downward to 0.3% because of the unfavourable start to the year. The falling inflation rate and higher nominal wages mean that conditions for a consumption-driven recovery remain intact. In addition, a rebound in global trade and reductions in key interest rates are to be expected in the further course of the year, which will encourage investment and exports, giving manufacturers new impetus. Growth will likely pick up to 1.2% in 2025. Germany’s inflation rate will drop from 2.5% this year to 2.0% next year. Euro area GDP should grow by 0.6% in 2024 and 1.5% in 2025.