On Tuesday a new report from the IMK institute forecasts that Germany’s GDP is expected to shrink by 0.5% this year, as the largest economy in the EU continues to struggle with higher interest rates and an energy crisis.

The forecast of 0.7% GDP growth for 2024 is a significant downgrade from the institute’s projection in the spring, when it forecast that the German GDP would grow 1.2%. By comparison, other economic institutes in Germany have been more optimistic, such as the Ifo, which predicted a GDP growth of 1.4% in 2024.

The IMK said, “The German economy, weakened by energy price shocks, will not really get going in the coming months, because high interest rates and a subdued global economy are putting the brakes on.”

The report predicted that declining inflation and stronger wage increases would lead to a recovery of private consumption from the end of the third quarter, adding, “This positive development comes so late that it can only somewhat mitigate the recession in 2023 as a whole, not prevent it.”

In the first quarter of the year, Germany had slipped into a technical recession as GDP growth was revised downward, from 0 to -0.3%. Last week, the Bundesbank announced that this quarter was likely to see an economic contraction as private consumption slowed, and industry continued to weaken.

Deutsche Bank CEO Christian Sewing has warned that if the nation does not immediately address structural economic issues, Germany may one day once again be called, the “sick man of Europe.”