IMF drastically lowers economic forecast for Germany
Germany is likely to be the only major economy to slip into recession this year
The German economy is facing difficult times, with the International Monetary Fund (IMF) now forecasting a contraction of 0.3 percent for the current year. The IMF is thus more pessimistic than previously, when it forecast a decline of just 0.1 percent. Germany will thus be the only major economy to slip into recession this year.
By contrast, the IMF is more optimistic about other countries. Spain is now forecast to grow by 2.5 percent instead of the 1.5 percent originally expected, and Italy can also look forward to economic growth of 1.1 percent instead of the 0.7 percent previously forecast. Even the UK, which is affected by the impact of the Brexit, will record a plus of 0.4 percent, compared with a minus of 0.3 percent expected in April.
According to the IMF forecast, the euro zone will see economic growth of 0.9 percent this year, compared with the 0.8 percent previously predicted. The U.S. is also expected to develop positively, with growth of 1.8 percent instead of the 1.6 percent originally expected. However, there are concerns here as well, as increased real incomes and a recovery in auto purchases may influence the current growth forecast, but may not be sustainable as further interest rate hikes are expected.
Despite the more optimistic outlook for the global economy, which now has a global growth forecast of 3.0 percent (up from the previously expected 2.8 percent in April), IMF chief economist Pierre-Olivier Gourinchas urges caution. High inflation continues to be a concern, and it is too early to celebrate exuberantly, he said. The economic situation therefore remains fragile and requires close monitoring.