Estimated inflation growth next year has dropped to the current value of 4.3% compared to the October five percent forecast. The economy is expected to grow at 1.7% of gross domestic product in 2025, which represents a reduction from the estimated two percent growth of the domestic economy compared to last month. The Council for Budget Responsibility (RRZ) informed about this on Thursday in an update of its macro forecast.
“Economic growth is thus influenced not only by the increase in domestic demand as a result of the provision of blanket energy subsidies (an increase of over 0.2 percentage points), but especially negative development trends abroad (decrease of more than 0.4 percentage points),” experts said.
Based on the evaluation of the RRZ, the measure capping the prices of gas and heat for households will translate into an increase in the public administration budget deficit next year by 292 million euros. However, the provision of blanket energy subsidies in such a volume will also be reflected in macroeconomic indicators, for example in increased household consumption, which will contribute to economic growth, experts added.
More however, according to them, the deterioration of assumptions about the development of the European economy in the coming years will have a more significant impact on development. It is mainly about the deepening economic and political problems in the Eurozone, above all in Germany, where there is stagnation and reduction of industrial competitiveness, long-term problems in the automotive and energy sectors, political crisis and early elections, specified by RRZ.
“By reducing the expected economic growth of our neighbors, also in connection with the poor performance of the German economy, postpones a significant recovery abroad until 2026,” added the council. In the next year, the main driver of growth should be investments created primarily by the recovery plan and European Union funds. At the same time, however, they also remain the main risk factor for economic growth in the event of their insufficient utilization, the representatives of the council pointed out.
