Konjunktur: Hoffnung für die Wirtschaft: Ifo erhöht Prognose deutlich

The Ifo Institute has surprisingly increased its economic outlook for Germany's economy. Economists now anticipate a Gross Domestic Product (GDP) growth of 1.4 percent this year - 0.6 percentage points more than previously expected. The report states that "lights are shining particularly in the crisis-hit industry." The same outlook for the following year sees German economy grow by 1.2 percent - 0.4 percentage points more than the summer forecast.

This aligns with increasingly optimistic assessments from other experts. The Deutsche Institute for Economic Research (DIW) had doubled its June forecast of 1.2 percent growth from just 0.5 percent earlier. Hope for the industry is attributed to the debt-financed investment package by the German government and increased foreign demand.

Both factors, combined, have apparently won the "conjunctural advantage" and prevented stronger braking from the energy price shock. The industry, which has suffered from economic performance in recent years due to US tariffs and rising Chinese competition, may even see a 1.8 percent increase in economic performance this year. Despite the "stirrups" from the past weeks, the outlook for the economy remains robust.

These disturbances include the Iran war, as well as low river levels. However, the good news does not extend to job losses: the Munich economists do not expect a decrease in unemployment this year. On the flip side, the economy's growth comes with a rapid increase in government debt. The public financial deficit could rise from three percent of GDP last year to 4.6 percent by 2028.

The institute's forecast also predicts an increase in inflation: for this year, the institute expects an inflation rate of 2.8 percent, rising to 3 percent by 2027 - both significantly above the European Central Bank's (ECB) 2 percent target.