germany strike trams
Trams are parked during a nationwide strike over a wage dispute held by public transport workers on February 2, 2024 in Frankfurt am Main, western Germany. Image Credit: AFP

Berlin - The German government will slash its economic growth forecast for this year to just 0.2 per cent in a report due to be published next week, according to a source with knowledge of the matter.

Factors contributing to the depressed figure " significantly down from October's forecast of 1.3 per cent " included low growth in the global economy and a German constitutional court ruling that blew a hole in the country's budget, according to the source.

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An economy ministry spokesperson said on Tuesday evening they could not comment on the numbers, adding the government would provide comment when the official report was published.

The ministry warned in a separate monthly report on Wednesday that the expected recovery of Europe's largest economy could be further delayed by geopolitical tensions, including in the Red Sea, as well as a series of strikes domestically.

The gloomy prospects for Germany's economy in 2024 come after the country's economy shrank by 0.3 per cent in 2023 under the pressure of high inflation, rising interest rates and a weak global economy.

Both the Ifo and IfW economic institutes lowered their most recent 2024 forecasts but were more optimistic than the government: Ifo is now predicting economic growth of 0.7 per cent, from a previous 0.9 per cent, and the IfW is forecasting 0.9 per cent from 1.3 per cent earlier. They plan to present new forecasts in March.

In contrast, the German business association BDI had issued a low forecast in mid-January for growth of 0.3 per cent, warning that the economy was at a "standstill".

A new forecast for 2025 is not expected in the report next week. The government, which forecast economic growth of 1.5 per cent in October, should give an update on that figure this spring.

German Finance Minister Christian Lindner said on Sunday that the coalition government planned to present a concept to strengthen Germany's position as an industrial location this spring, after multiple warnings from both him and Economy Minister Robert Habeck that the country was losing its competitiveness on a global scale.