Latest news with #DIW
Local Germany
14-03-2025
- Business
- Local Germany
'Erratic' US policies likely to hit German growth
The DIW economic institute downgraded its forecast for Europe's biggest economy from a previous estimate of 0.2 percent expansion made in December. For 2026, it now expects growth of 1.1 percent, down from 1.2 percent previously. Firms were faced with uncertainty in the face of "erratic" US trade policy and potential counter-measures, the German institute warned. The effect was particularly pronounced for the many German companies that rely on exports, said Geraldine Dany-Knedlik, DIW's head of forecasting and economic policy. Germany is heavily dependent on exports, and last year the United States overtook China to become the country's top trading partner. US President Donald Trump, who has been threatening allies and adversaries alike with sweeping tariffs, has said he wants to hit all EU imports to the United States with hefty duties. Weakness in key trading partners has been a reason why Germany has been mired in recession for the last two years, combined with a manufacturing slowdown and tepid consumer demand. But signs that negotiations to form a new coalition government following February's election were making quick progress provided a bright spot for the economy and might give people some certainty, Dany-Knedlik said. "We might soon expect a government that is capable of action, and that should quickly make economic conditions clearer," she said. A proposal by likely next chancellor Friedrich Merz to spend €500 billion over 10 years on infrastructure could provide a major boost, potentially lifting GDP by two percent a year, DIW said. On Friday, Merz announced that he had reached a deal with the Greens that would allow him to get his spending plans through parliament on Tuesday. These plans were not included in the DIW's latest forecasts, however. DIW president Marcel Fratzscher said that a more fundamental reform of strict rules limiting government debt -- known as the "debt brake" -- was also sorely needed. "Strengthening public investment and reducing economic uncertainty should be a top priority for the new federal government," he said.
Zawya
14-03-2025
- Business
- Zawya
Germany's fiscal expansion would boost GDP from 2026, DIW says
Germany's planned 500-billion-euro infrastructure fund could raise economic output by an average of more than two percentage points per year over the next 10 years, Germany's DIW economic institute said on Friday. German chancellor-in-waiting Friedrich Merz was set to make a last-ditch attempt on Friday to convince the Greens of his plans for a massive increase in state borrowing to bolster defence and infrastructure. DIW, one of Germany's main economic forecasters, cut its forecasts for Europe's largest economy on Friday for this year and next due to political uncertainty and global trade tensions. Next year, gross domestic product will likely increase by 1.1%, down from the DIW's December forecast of 1.2%, the institute said. This forecast does not take into account defence and infrastructure expenditures. If a defence and infrastructure spending ramp-up is included, growth of 2.1% is expected in 2026, DIW said. The institute expects the economy to stagnate this year, revising its previous forecast for 0.2% growth. This is because the fiscal expansion would not have any impact in the current year. One reason for the downward revision is private consumption, which is developing more weakly than expected in Germany despite rising real wages, DIW said. Many people in Germany are holding back on major purchases due to the tense global political situation and job security concerns, it added. The IfW institute revised up its 2026 estimate for Germany, predicting 1.5% growth off the back of the expected boom in public spending. Like the DIW, it also expects a stagnation this year. In 2024, Germany became the only G7 country to post a contraction for two consecutive years. Strengthening public investment and reducing economic uncertainty should be a top priority for the new German government, said DIW president Marcel Fratzscher on Friday in the presentation of the new forecasts. "Although special funds are not the ideal solution, they could offer a pragmatic approach to compensate for Germany's investment weakness and pull the German economy out of the crisis," Fratzscher said. Merz has justified the need to push the constitutional amendments through the outgoing parliament with the recent shift in policy in the United States under President Donald Trump, warning that a hostile Russia and an unreliable U.S. could leave the continent exposed. "The loss of the U.S. as a reliable political partner poses major challenges for the future German government and exacerbates the already difficult situation, especially for export-oriented companies," said Dany-Knedlik.
Reuters
14-03-2025
- Business
- Reuters
Germany's fiscal expansion would boost GDP from 2026, DIW says
BERLIN, March 14 (Reuters) - Germany's planned 500-billion-euro infrastructure fund could raise economic output by an average of more than two percentage points per year over the next 10 years, Germany's DIW economic institute said on Friday. German chancellor-in-waiting Friedrich Merz was set to make a last-ditch attempt on Friday to convince the Greens of his plans for a massive increase in state borrowing to bolster defence and infrastructure. Get a look at the day ahead in European and global markets with the Morning Bid Europe newsletter. Sign up here. DIW, one of Germany's main economic forecasters, cut its forecasts for Europe's largest economy on Friday for this year and next due to political uncertainty and global trade tensions. Next year, gross domestic product will likely increase by 1.1%, down from the DIW's December forecast of 1.2%, the institute said. This forecast does not take into account defence and infrastructure expenditures. If a defence and infrastructure spending ramp-up is included, growth of 2.1% is expected in 2026, DIW said. The institute expects the economy to stagnate this year, revising its previous forecast for 0.2% growth. In 2024, Germany became the only G7 country to post a contraction for two consecutive years. The IfW institute revised up its 2026 estimate for Germany, predicting 1.5% growth off the back of the expected boom in public spending. Like the DIW, it also expects a stagnation this year.
