In its spring projections, recently presented by economy minister Robert Habeck, the German government has slightly raised its forecast for economic growth in 2024, while easing its inflation outlook. The forecast is now set to 0.3% growth, from 0.2% previously.

Habeck and finance minister Christian Lindner said structural changes are still needed to achieve actual progress. During the presentation in Berlin, Habeck said, “As the year progresses, we are now seeing signs of a slight economic upturn and that the economy is slowly emerging from its weak phase.”

“Despite these signs of hope, I am still concerned about the structural problems of Germany as a business location,” Habeck added. “If we want to achieve higher growth in the medium and longer term, we need structural changes.”

While inflation is expected to ease up in 2024, growth is estimated to remain weak, with GDP projected to grow by only 1.0% in 2025. The German government said it forecasts inflation to be 2.4% this year, versus the previous estimate of 2.8%; inflation was at 5.9% in 2023. For 2025, the government sees inflation falling to 1.8%.

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Business confidence of companies in Germany has also improved further in April. The business climate index of the German economics institute ifo (Munich; www.ifo.de/en) moved up by 1.5 points to 89.4. This has been the third increase in succession, according to the economic experts. The companies are happier not only with the current business (up 0.8 points to 88.9), but are also looking forward to the future more optimistically (up 2.2 points to 89.9). 

The business climate has improved in all four economic segments: services, trade, construction, and manufacturing. With the latter, however, the improvement was based – as in the construction industry – solely on expectations, whereas the present situation was adjudged to be worse than before. The backlog of orders held by companies in the processing trade declined further, and increases in production output are, according to ifo, not in sight. 

Things look exactly the same with the rubber and plastics industries as a subsector of manufacturing: the sub-index for the expectations rose by 13.2 points to -4.8, while the mood barometer for the present business situation fell by 9.3 points to -17.6. Overall, these two countermovements resulted in an improvement in the business climate for the rubber and plastics industry in April of 1.9 points to -11.3.