Economic Experts Predict Prolonged Period of Pessimism for Germany - Germany's Economic Outlook Remains Grim for an Extended Period, According to Expert Opinions
The German economic landscape isn't exactly shining at the moment, with one grim headline following another leading up to the federal elections. Economists worldwide haven't been painting a bright picture for Germany's economic prospects, predicting sluggish growth for the next few years. In fact, Germany's growth is forecasted to trail behind the average of other industrialized nations in 2022, 2026, and 2027.
This pessimistic outlook was confirmed by a survey of over 1,300 experts in 125 countries, including economists and scientists. They projected a modest 0.4% growth for Germany this year, while the global economy might expand by 2.9%. And the future isn't looking much brighter with a projected growth rate of 1% in 2025 and 1.3% in 2026, both still lagging behind other industrialized nations.
Moreover, the experts foresee global economy surpassing the 3% growth threshold in both years, highlighting Germany's slower progress.
Reflecting on this grim situation, Niklas Potrafke, an economist from Ifo Institute, observed, "Germany urgently needs a different economic policy to rekindle growth. In the global economic competition, Germany has noticeably lost its charm."
To boost its growth, experts propose several changes in economic policy:
- Reduce bureaucracy to stimulate planning procedures and economic growth, streamline power grid expansion, and renewable energy development.
- Increase public investment in infrastructure to tackle structural challenges and support economic recovery, as Germany's public investment has been low among advanced economies.
- Maintain monetary policy easing to encourage consumer spending and corporate credit demand, as interest rate cuts can lead to decreased capital costs.
- Implement significant fiscal reforms to address structural issues, reduce energy costs, augment innovation, and improve competitiveness.
- Offer fiscal, customs, and foreign exchange incentives for large investments in sectors like energy and manufacturing through the Incentive Regime for Large Investments.
Although Germany is projected to grow by 0.3% in 2025, this is substantially lower than earlier predictions and is far from the growth rates of other advanced economies, such as the euro area and the UK.
The proposed changes to Germany's economic policy, including reducing bureaucracy and increasing public investment, aim to foster an Economic and Monetary Union that aligns with the growth rates of other industrialized nations. Despite these measures, economists still anticipate Germany's growth rate of 0.3% in 2025 to be significantly lower than that of other advanced economies like the euro area and the UK.
