By Maria Martinez
BERLIN (Reuters) - The German economy is not picking up as quickly as expected, the economic institute DIW Berlin said on Thursday, forecasting a recession at the start of the year.
Gross domestic product is expected to contract by 0.1% in the first quarter, according to DIW, after the economy shrank by 0.3% in the final three months of 2023. Two consecutive quarters of falling output are defined as a technical recession.
"As inflation continues to decline, private consumption will again become the main driver of the economic upswing from the second quarter onwards," DIW's Timm Boenke said.
Although a return to modest growth is expected by the second quarter, the German economy will stagnate in the current year, DIW said, cutting its previous forecast of 0.6% growth.
DIW Berlin is the latest economic institute to cut forecasts. Two German forecasting institutes cut their 2024 growth forecasts on Wednesday in the latest blow to the euro zone's largest economy.
"We are a bit more pessimistic than our colleagues," said Marcel Fratzscher, DIW president, in the presentation of the forecasts.
In 2025, economic output is expected to increase by 1.2%, DIW said, slightly up from a previous forecast of 1.0%.