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Konjunkturbericht Nordrhein-Westfalen: Verhaltene Erholung der Konjunktur

Februar 2024

In Germany, economic output fell quite significantly in the final quarter after largely stagnating in the previous three quarters. The decline in GDP is primarily due to investment in equipment. The decline in construction investment also intensified once again. In comparison, private consumption developed relatively robustly. Permanently higher prices for energy, raw materials and materials are increasingly becoming a problem for companies. In addition to these burdens, a number of other factors increase uncertainty about future developments and contribute to the unusually poor mood among companies at present. In particular the issues of "geopolitics" and "society" are currently associ-ated with general uncertainty, which is weighing on investment and private consumption. Against this backdrop, the recovery in GDP is only likely to gain some momentum over the course of this year. The high level of uncertainty continues to weigh on domestic demand. Nevertheless, private households are likely to increase consumer demand in view of the significant rise in real disposable income. Falling interest rates and a slight increase in foreign demand should then also lead to a stronger upturn in investment. GDP is expected to expand by 0.3% on average this year. In 2025, GDP will probably increase by 1.2%. The economic weakness led to a noticeable rise in unemployment last year. Labor market indicators suggest weak employment growth at the beginning of the year. From the second half of 2024, employment is likely to have peaked, also due to de-mographic factors, and fall slightly by the end of the forecast period. At the same time, unemployment is likely to fall again and average 5.7% in 2024 and 5.5% in 2025. The inflation rate continued to fall year-on-year in January and amounted to 2.9%. Falling prices for household energy in particular are currently dampening the gen-eral rise in prices. In view of weak consumer demand, inflation is likely to fall fur-ther in the coming months. The annual average inflation rate is likely to be 2.2% this year. The average annual inflation rate for 2025 is 2.0%. Fiscal policy will be restrictive in the two forecast years. The reasons for this in-clude the abolition of the "electricity and gas price brakes" and probably the decline in the use of the tax-free inflation compensation premium. In addition, some consol-idation measures were decided in response to the ruling of the Federal Constitutional Court of November 15, 2023, such as the faster increase in the CO2 price than origi-nally planned or the increase in air traffic tax. It is expected that adjustments to the income tax rate will provide relief for citizens over and above the legislation that has been passed. The general government financing deficit is likely to fall to just under EUR 46 billion in the current year. In 2025, the financing deficit is likely to remain at a similar level and amount to a good EUR 48 billion.

Schmidt, T., G. Barabas, B. Blagov, M. Dirks, F. Kirsch and P. Schacht (2024), Konjunkturbericht Nordrhein-Westfalen: Verhaltene Erholung der Konjunktur: Februar 2024. 2024, 1.

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