The leading economic research institutes of Germany have sharply plunged their forecasts for the largest economy of Europe. With Germany currently facing an industrial recession, the Ifo institute’s joint economic forecast for the year 2019 has been revised down from almost 0.8 percent of GDP growth that is encountered in the spring to just attain 0.5 percent.
There are many reasons for poor performance including low global demand for capital goods, which has impacted the export-reliant economy of Europe in relative to the political uncertainty as well as structural changes in the automotive sector.
The head of forecasting and economic policy at the German Institute for Economic Research, Claus Michelsen said that “Right now, German industry is in recession and that’s why this is also affecting the service providers connected to those firms.” “The major fact is that the economy of Germany is expanding at all regions because of the continuous positive spending mood of private households, which is upheld by tax breaks, good wage deals and the expansion of the government funds.
For the next year, the several economic institutes have minimized their GDP growth that predicts to 1.1 percent from 1.8 percent forecasted in the spring season. Mr. Michelsen added that “Risks increasing from an escalation of the trade conflict is extremely high. But, Brexit would have messy costs, thus it would cause German gross domestic product to be 0.4 percent slow in the upcoming year than if there was an orderly exit.”
The report also presented that the employment growth in Germany has lost its momentum due to a consequence of the economic plunge along with the industrial zone cutting jobs, while, service providers, as well as the construction sector, are still hiring skilled manpower.