Germany's Ifo institute cut its 2024 economic growth forecast on Wednesday as weak consumption and high interest rates continue to take their toll on the euro zone's largest economy.
Ifo cut its growth forecast for this year to 0.2%, down from 0.7% in January and 0.9% in December.
"Consumer restraint, high interest rates and price increases, the government's austerity measures and the weak global economy are currently dampening the economy in Germany and leading to another winter recession," Ifo's Timo Wollmershaeuser said.
The German economy shrank by 0.3% in the final three months of 2023 and it is expected to contract again in the first quarter, according to Wollmershaeuser. Two consecutive quarters of falling output are defined as a technical recession.
With the gradual easing of interest rate and inflation, economic output will accelerate towards the middle of the year, the economist added.
Inflation is expected to fall to 2.3% this year from 5.9% last year, and drop to 1.6% in 2025.
For 2025, Ifo raised its growth estimate by 0.2 percentage points to 1.5%.
There was also good news on the labour market. Despite the economic downturn, the number of people in employment should rise to 46.1 million this year from 45.9 million in 2023, and reach a record 46.2 million next year.
The unemployment rate is expected to rise to 5.9% in 2024 from 5.7% last year, before falling to 5.6% in 2025.
