German Economy Predicted to Grow Between 1.6% to 1.9% in 2024, says Economy Minister
The German Economy and Climate Protection Minister Robert Habeck announced on Monday that the country’s economy is expected to grow by 1.6% to 1.9% in 2024, after a modest expansion of 0.4% this year. He said that the government’s increased spending on defence and the energy transition, as well as the easing of inflation pressures, would support the recovery.
Government Spending to Boost Growth
Habeck said that the government’s fiscal policy would play a key role in stimulating the economy, especially in the areas of defence and the energy transition. He said that Germany would meet its NATO commitment to spend 2% of its GDP on defence by 2024, and that it would invest more in renewable energy sources and infrastructure to achieve its climate goals.
He also said that the government would continue to provide support to households and businesses affected by the pandemic, such as extending the short-time work scheme until March 2024 and providing tax relief and subsidies. He added that the government would maintain a balanced budget and respect the constitutional debt brake.
Inflation to Ease as Energy Prices Stabilize
Habeck acknowledged that inflation was a major challenge for the economy, as it reached a record high of 10.4% in October 2022, mainly driven by soaring energy prices and supply chain disruptions. He said that the government had taken measures to mitigate the impact of energy price shocks on consumers, such as capping gas and electricity prices and providing compensation payments.
He said that inflation was expected to decline gradually in 2023 and 2024, as energy prices stabilize and supply bottlenecks ease. He said that inflation would average 6.3% in 2023 and 2.4% in 2024, according to the latest projections by the European Commission.
He also said that wage growth had been lagging behind inflation, but that he expected it to catch up as the labour market remained tight and collective bargaining resumed. He said that he hoped that wage negotiations would be conducted responsibly and take into account the competitiveness of the German economy.
Outlook Remains Uncertain
Habeck cautioned that the economic outlook was still subject to significant uncertainty, mainly due to the evolution of the pandemic and its variants, as well as geopolitical tensions and trade conflicts. He said that the government was prepared to adapt its policy response if needed, but that he was confident that Germany would overcome the crisis and return to normal growth rates in 2024.
He said that Germany’s economic performance was also dependent on the recovery of its main trading partners, especially in Europe. He said that he supported a coordinated and ambitious European fiscal policy, as well as a swift implementation of the Next Generation EU recovery fund.
He concluded by saying that Germany’s economic strategy was based on three pillars: resilience, sustainability and innovation. He said that Germany aimed to strengthen its economic resilience by diversifying its supply chains and enhancing its digitalization. He said that Germany aimed to achieve its sustainability goals by reducing its greenhouse gas emissions and increasing its use of renewable energy sources. He said that Germany aimed to foster its innovation potential by investing more in research and development and supporting start-ups and small and medium-sized enterprises.
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