A return to growth is expected to gradually reinforce confidence, further bolstering consumption in 2025. Private investment is also expected to recover in 2025 on the back of improved demand and moderate monetary policy easing during 2024-25.
As a result, GDP growth is projected to accelerate to between 1-1.5 per cent during 2025-26.
Inflation is expected to continue falling this year on subdued demand and as lower energy and food import prices continue to pass through to retail prices. Core inflation is projected to slow as well, but remain above headline inflation, as services prices remain sensitive to robust wage growth, the IMF said in a release.
Over the medium term, rapid population aging is expected to slow economic growth and adversely affect public finances. As baby boomers retire and recent immigration waves subside, the annual growth rate of Germany’s working-age population is expected to fall by around 0.7 percentage points—more than any other G7 country.
These unfavorable demographics are projected to slow annual economic growth to around 0.7 per cent over the medium term. An aging population will also adversely affect public finances as tax revenue growth slows and spending on pensions and healthcare rises, the IMF observed.
ALCHEMPro News Desk (DS)
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