Berlin, 26 September 2024 (dpa/MIA) - A group of leading German economists lowered their growth forecasts for the German economy on Thursday, predicting that the country's gross domestic product (GDP) would shrink slightly during the current year.

German GDP will decline by 0.1% over the course of 2024, according to the Joint Economic Forecast Project Group. That is down 0.2 percentage points from the group's forecast from six months ago.

The economists predicted only a tepid recovery in the next two years, with growth of 0.8% in 2025 and 1.3% in 2026. Six months ago, the group had predicted growth of 1.4% in 2025.

"In addition to the economic downturn, the German economy is also being weighed down by structural change," said Geraldine Dany-Knedlik, head of forecasting and economic policy at the German Institute for Economic Research (DIW) in Berlin.

"Decarbonization, digitalization and demographic change – alongside stronger competition with companies from China – have triggered structural adjustment processes that are dampening the long-term growth prospects of the German economy," she said.

The forecast group also includes economists from the Munich-based ifo Insitute, the Kiel Institute for the World Economy (IfW), the Halle Institute for Economic Research (IWH) and the Leibniz Institute for Economic Research (RWI) in Essen.

According to the forecast, structural change and the economic slump are particularly affecting Germany's manufacturers.

The competitiveness of capital goods manufacturers
and energy-intensive industries are suffering from higher energy costs and increasing competition from high-quality industrial goods from China, which are crowding out German exports on the global markets, the economists stated.

Persistently high interest rates and the high level of economic and geopolitical uncertainty are weighing on companies' investment activity, the report said. Households in Germany are saving more, lowering consumption.

The report also warns of further political uncertainty in Germany, where Chancellor Olaf Scholz's three-party coalition argued for months over how to make cuts to the 2025 budget.

Although ministers recently adopted a draft budget, the economists warned that internal disputes within the government could still upend the process.

The economists said that a proposed package of tax cuts and other measures aimed at boosting the German economy, meanwhile, contain some promising measures but remains far from implementation. That means it will do little to bring certainty for companies and households.