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IFO Revises Downward 2024 Growth Projection By -0.5pp, To +0.2% Y/Y

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The IFO institute has revised its 2024 GDP growth projection downwards by -0.5pp, to +0.2% Y/Y. For 2025, the institute has revised up its estimate by +0.2pp to +1.5% Y/Y (but note that this is a smaller upward revision for 2025 than the downward revision for 2024).

  • IFO cites "Consumer restraint, high interest rates and price hikes, the government’s austerity measures, and the weak global economy" as drivers behind the weaker near-term economic conditions.
  • However, it sees economic growth begin to accelerate from the middle of this year as "interest rate and price burdens gradually disappear and consumers’ purchasing power increases".
  • This puts the 2024 IFO growth projection in line with both the Bloomberg consensus as well as the projection of the Federal Ministry of Economic Affairs. Both were also revised downwards recently.
  • Additionally, IFO sees headline CPI to rise +2.3% Y/Y in 2024 on average (revised +0.1pp; vs +5.9% prior) and core CPI inflation at +2.8% Y/Y (revised -0.1pp; vs +6.0% prior), both above the ECB target. Despite the downward revision to core inflation, IFO notes rising wages will maintain upside pressures on labour-intensive services prices.
  • For 2025, IFO projects +1.6% and +2.2% for headline and core, respectively (revised -0.2pp for headline, core unchanged to their previous forecast).
  • For comparison, Bloomberg consensus for headline CPI inflation currently stands at +2.6% for 2024 and +2.2% Y/Y for 2025, higher than the IFO's estimates for both years.
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The IFO institute has revised its 2024 GDP growth projection downwards by -0.5pp, to +0.2% Y/Y. For 2025, the institute has revised up its estimate by +0.2pp to +1.5% Y/Y (but note that this is a smaller upward revision for 2025 than the downward revision for 2024).

  • IFO cites "Consumer restraint, high interest rates and price hikes, the government’s austerity measures, and the weak global economy" as drivers behind the weaker near-term economic conditions.
  • However, it sees economic growth begin to accelerate from the middle of this year as "interest rate and price burdens gradually disappear and consumers’ purchasing power increases".
  • This puts the 2024 IFO growth projection in line with both the Bloomberg consensus as well as the projection of the Federal Ministry of Economic Affairs. Both were also revised downwards recently.
  • Additionally, IFO sees headline CPI to rise +2.3% Y/Y in 2024 on average (revised +0.1pp; vs +5.9% prior) and core CPI inflation at +2.8% Y/Y (revised -0.1pp; vs +6.0% prior), both above the ECB target. Despite the downward revision to core inflation, IFO notes rising wages will maintain upside pressures on labour-intensive services prices.
  • For 2025, IFO projects +1.6% and +2.2% for headline and core, respectively (revised -0.2pp for headline, core unchanged to their previous forecast).
  • For comparison, Bloomberg consensus for headline CPI inflation currently stands at +2.6% for 2024 and +2.2% Y/Y for 2025, higher than the IFO's estimates for both years.