BERLIN, Sept. 26 (Xinhua) -- The German Macroeconomic Policy Institute (IMK) on Tuesday cut its 2024 economic growth forecast for the country to 0.7 percent from earlier projection of 1.2 percent.
Europe's largest economy is "weakened by the consequences of the energy price shocks and the global monetary policy tightening and will continue to recover only sluggishly in 2024," the Dusseldorf-based institute said in a statement.
With global economic growth remaining "subdued" next year, Germany as an exporting country would receive "little impetus" from its trading partners. Imports are to rise by 1.8 percent in 2024, but exports are expected to only grow slightly by 0.5 percent.
Germany's industry, which is concerned about its international competitiveness due to cost disadvantages, has recently recorded declining orders. The IMK expects the country's energy-intensive industries in particular to be "hampered by high energy prices" next year.
With food and energy prices driving consumer prices, inflation in Germany is normalizing more slowly than in other European countries. While inflation in the eurozone has already slowed to 5.2 percent in August, it was still 6.1 percent in Germany, according to official figures.
To push inflation back below its 2 percent target, the European Central Bank (ECB) has raised its key interest rate successively to 4.5 percent, exceeding the level seen during the 2008 financial crisis. Inflation is "still expected to remain too high for too long," ECB President Christine Lagarde said on Monday.
Although Germany's inflation rate is expected to get close to the ECB target as early as next year, the IMK warned that there is a "considerable risk" that the effect of the key rate hikes would be "greater than previously expected, with a financial crisis also remaining a relevant risk."
While inflation is still weighing on employees' incomes this year, real wage growth would return in 2024. As a result, private consumer spending would "carry the moderate recovery" of the German economy with an increase of 1.6 percent, the institute said.
