The German Bundesbank today sharply cut growth forecasts for Europe’s first economy for 2024 from 1.2% to 0.4%, mainly due to weak exports.

For 2023, the Bundesbank was less pessimistic and forecast a recession of 0.1%, while previously forecasting 0.3%.

The German Central Bank indicated in a statement that “the economic recovery is suffering from some delay.”

The institution added that “weak external demand constitutes the main brake on the industry, in addition to the fact that private consumption is still limited and high financing costs make investment difficult,” stressing that the situation “will become clearer” in early 2024.

The German economic model, which is based on a strong export industry, suffers from a darker international situation and from rapidly rising interest rates in the euro zone, which hinders consumption and investment.

Energy prices are very high compared to its competitors, especially since the war in Ukraine and the halting of deliveries of cheaper Russian gas, which is hurting energy-intensive activities trying to restore previous production levels.

The German government still expects GDP to rise by 1.3% next year, while the International Monetary Fund expects a 0.9% recovery.

Regarding inflation, the German Central Bank expects the situation to continue improving, as has been the case in recent months, pointing to 2.7% in 2024, according to the Harmonized Consumer Price Index.