By Maria Martinez
BERLIN (Reuters) – Germany will grow by only 0.4% next year if it fails to overcome structural challenges but can achieve 1.1% growth if the right economic policy course is set, the Ifo Institute said on Thursday.
Due to major uncertainty, the Ifo Institute is presenting two scenarios for the current economic forecast. The economic institute had forecast 0.9% growth in its September forecasts.
“At the moment, it is not yet clear whether the current phase of stagnation is a temporary weakness or one that is permanent and hence a painful change in the economy,” said Timo Wollmershaeuser, head of forecasts at Ifo.
According to Wollmershaeuser, tight monetary policy in Europe and in many German export markets has contributed to weak industrial orders that are weighing on the economy.
However, purchasing power has returned, and inflationary pressure, according to the economist, will also continue to ease in Germany.
In both scenarios presented, the Ifo Institute expects 2.3% inflation for the coming year and 2.0% for 2026.
