German economy expects contraction this year

By Bahattin Gonultas

BERLIN (AA) - The German government on Wednesday revised its GDP forecast for 2024 downwards from 0.3% to minus 0.2%.

But Economy and Climate Protection Minister Robert Habeck told a press conference in Berlin that growth is expected to recover to 1.2% in 2025 and 1.6% in 2026.

Habeck argued that Germany is a strong country, trying to maintain optimism despite the government's disappointing economic forecasts.

Saying that economic conditions are currently unsatisfactory, Habeck said: “But we will free ourselves from them and find our way out.”

Stating that the German economy has not shown strong growth since 2018, Habeck said a package of 49 measures prepared by the government is a first step, but more is needed for the economy to return to the growth path in the long term.

The German economic management also lowered its inflation forecast by 0.2 percentage points in the growth report, predicting that inflation, which was 5.9% last year, will drop to 2.2% this year and 2% in 2025. Inflation was predicted to be 1.6% in 2026.

The German economy is struggling to grow due to rising interest rates, cyclical headwinds, and structural changes.

The economy shrank 0.1% in the second quarter of the year due to declining investments.

*Writing by Gokhan Ergocun fro Istanbul