Institutions: Due to geopolitical risks, the German economy may deteriorate

On August 27th, Jinshi data, due to geopolitical uncertainty, economists at the German Reconstruction Credit Bank (KfW) lowered their expectations for the German economy. They now expect the GDPrise rates for 2024 and 2025 to be 0.1% and 1.0%, respectively, down from previous forecasts of 0.3% and 1.2%. The bank stated that the conflicts in the Middle East and Ukraine are the main downside risks. However, after a 0.1% contraction in the economy in the second quarter, if private households start consuming instead of saving, the development of the German economy may be better than expected. Fritzi Koehler-Geib, Chief Economist at KfW, said that consumer confidence has strengthened since January, and purchasing power has been helped by the rise in real wages. She said, “The German economy will gradually recover in the coming quarters, but the annual rise rate will not significantly rebound until 2025.”