German economic recovery gaining strength: Researchers

BERLIN

Leading researchers have said they were now more optimistic about this year's outlook for the German economy, as lower inflation boosts private consumption and global trade picks up.

The Ifo institute upgraded its forecast for Europe's top economy to 0.4 percent growth this year, from 0.2 percent previously.

"New hope is currently emerging," said Timo Wollmershaeuser, head of forecasts at Ifo.

"The German economy is slowly working its way out of the crisis. The second half of 2024 is expected to be significantly better than the first half."

Germany has battled through a prolonged period of economic weakness, weighed down by soaring inflation, a manufacturing slowdown and cooling demand from key trading partners like China.

Germany was the only major advanced economy to contract in 2023 but the first green shoots of the recovery are taking hold, experts say.

"During the remainder of the year, the purchasing power of private households is likely to grow stronger" as inflation falls back further, Ifo said in its statement.

Global trade and industrial production "should continue to recover", it said, bolstered by rising investments on the back of lower borrowing costs in industrialised countries.

Easing inflation prompted the European Central Bank to cut interest rates for the first time since 2019 earlier this month, and Ifo researchers expect two more rate reductions this year.

But Germany's economic performance will be sluggish compared to the wider 20-nation eurozone, which the European Union predicts will expand 0.8 percent in 2024.