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OUTLOOK
ON GERMANY
We highlight economic forecasts , machine tool outlooks and mechanical engineering expectations in Germany for sheet metal manufacturers .
“ Reforms to boost growth and recovery in the German economy are being urged by various institutions .”
On 15 July 2024 , the Executive Board of the International Monetary Fund ( IMF ) concluded its Article IV consultation with Germany .
“ The German economy has begun to recover from the energy-price shock . High energy prices arising from the shut-off of Russian gas contributed to surging inflation during 2022 – 23 which , in turn , weighed on economic activity . The impact of this shock was , however , greatly mitigated by a strong policy response , including the provision of income support while preserving incentives to conserve energy . Conservation efforts , together with steps to secure new energy supplies , have helped to return wholesale gas prices to more normal levels . Lower energy prices have in turn , together with monetary tightening , spurred rapid disinflation . Real wages are now growing , and the economy expanded in the first quarter of 2024 ,” said the IMF .
It expects a gradual economic recovery in Germany to continue this year . With wage growth now exceeding inflation , private consumption is expected to drive recovery during 2024 .
“ A return to growth is , in turn , expected to reinforce confidence which , alongside a gradual easing of monetary policy , should further bolster consumption and investment next year . Inflation is expected to slowly ease further as lower energy prices continue to pass through to retail prices , with core inflation remaining somewhat above headline inflation due to robust wage growth . Over the medium term , however , rapid population aging is expected to slow GDP growth to below one per cent , absent significant increases in productivity or much higherthan-expected immigration . Rapid population ageing is also expected to significantly increase pension and healthcare costs ,” added the IMF .
Reforms to boost growth
IMF Executive Directors commended German authorities for their strong economic fundamentals and policy response to the energy price shock , which greatly mitigated its impact . Noting persistent structural challenges , they also encouraged additional reforms to strengthen potential growth by boosting investment , productivity and labour supply .
Welcoming increased public investment in recent years , they emphasized that further increases are needed to help upgrade
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