The German economy faces challenges and gloomy forecasts for 2024

The German economy is currently facing a period of uncertainty and challenges, as confirmed by the 'five wise men', a council of economic experts that advises the government independently. These experts have drastically cut their growth forecast for the country, from 0.7% to just 0.2% for the year 2024. This forecast aligns with the estimates of the German Ministry of Economy, which predicts a growth of 0.3%. According to the 'five wise men', the German economy is being affected by the weakness in global economic demand, which has not yet regained momentum. In the words of Martin Werding, a council member, the German export industry has experienced a significant slowdown, contributing significantly to the current economic weakness. Additionally, households are showing reluctance towards consumption, and sectors such as industry and construction are seeing few new orders. Despite this gloomy outlook, it is expected that the German economy may gain momentum during the year 2024, with a possible increase in private consumption supporting economic growth. Experts also anticipate an increase in global trade and industrial production, which would benefit German exports. However, they warn about fierce competition, rising labor costs, and ongoing increases in energy prices that companies are facing. Regarding inflation, a decrease is forecasted, with a rate of 2.4% for the current year and 2.1% in 2025. These forecasts align with the conclusions of the European Commission, which also estimates a slower growth than expected for the German economy in 2024, with a minimal increase of 0.1%. This scenario reflects the structural challenges facing Germany, such as the shortage of skilled workers and the lack of investment in infrastructure. The experts' report also addresses the issue of freight transport and decarbonization. They suggest increased investments in road transport infrastructure, even proposing a distance-based toll, a measure that could be unpopular in a country where all highways are toll-free. Regarding decarbonization, they propose the need to promote the use of trucks with electric batteries or powered by green hydrogen as a measure to reduce emissions in freight transport. Amidst these discussions, some controversy has arisen regarding the use of green hydrogen, with accusations of conflicts of interest towards Veronika Grimm, an advisor to the group of experts. Despite this, Grimm has defended the need to consider both technologies as options to advance towards decarbonization goals. In this sense, the importance of advancing in the development of sustainable technologies is highlighted to ensure a economically and environmentally stable future for Germany.