By Holger Hansen

BERLIN (Reuters) -The German government will raise its economic growth forecast for this year to 0.3%, from 0.2% previously, and lower its forecast for inflation by 0.4 percentage points, a source told Reuters on Friday.

The forecasts are part of the government’s draft spring projections, which Economy Minister Robert Habeck is due to present next Wednesday.

In 2025, the government expects gross domestic product to grow by 1.0%, according to the source.

The economy ministry declined to comment.

Inflation is expected to fall to 2.4% this year, versus a previous projection of 2.8%. For 2025, the government sees inflation falling further, to 1.8%.

Economic experts from around the world expect inflation rates to decline in the years ahead, according to a quarterly survey published by the Ifo Institute on Friday.

“Compared to the previous quarter, inflation expectations for this year have fallen further,” said Ifo researcher Niklas Potrafke.

But in the medium term, inflation rates around the world are likely to remain above central banks’ inflation targets, he added.

The expected decline in inflation is primarily due to falling electricity and gas prices, Ifo’s economist Timo Wollmershaeuser told Reuters.

The Ifo institute forecasts German inflation at 2.3% in 2024 and 1.6% in 2025.

“We based our forecasts very closely on the expectations of the futures markets for wholesale prices for electricity and natural gas, which have been assuming significantly lower prices this year and next since the spring of last year,” Wollmershaeuser said.

The German economy, Europe’s biggest, was the weakest among its large euro zone peers last year, as high energy costs, feeble global orders and record-high interest rates took their toll.

Although inflation is expected to ease this year, growth is forecast to remain relatively weak.

This week, the International Monetary Fund cut its forecasts for German GDP by 0.3% for both 2024 and 2025, expecting 0.2% growth this year and 1.3% next year.

(Reporting by Holger Hansen, writing by Maria Martinez; editing by Rachel More, Sabine Wollrab, Matthias Williams, Alex Richardson, Louise Heavens and Christina Fincher)

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