Self-employed individuals are feeling quite down recently.
Self-employed individuals are feeling quite down recently.
Economic projections across Germany are looking grim, according to the Ifo Institute's latest reports. This unfavorable outlook is particularly affecting self-employed individuals, who are currently as unhappy with their economic situation as they were back in October 2022. The business climate index for self-employed individuals sank to -23.4 points in December, dropping from its previously recorded -21.3 points in November. This significant decline marks the lowest level since last October.
The current situation for self-employed individuals in Germany is bleak, as per the Munich-based Ifo Institute's survey in collaboration with software company Jimdo. These business owners have rated their existing business conditions negatively, and their outlook for the forthcoming months continues to worsen. Ifo expert, Katrin Demmelhuber, highlights the discomfort faced by this demographic in the face of persistent economic instability.
Service providers saw their business climate index lower once more, following a brief revival in November. This drop is due to a decrease in order backlogs and turnover, coupled with increasingly pessimistic turnover predictions. The situation for retailers remains negative, as well, with the tightening grip of banks on loans adding to their woes. Despite the tough times for self-employed retailers, securing loans from banks is easier for all sectors collectively, as the obstacle has been lowered from 38.6 to 35.1 percent.
Given this current atmosphere, the Association of Founders and Self-Employed Germany (VGSD) has urged for a change in economic policy. Board member, Andreas Lutz, emphasizes the importance of self-employed individuals and the service sector in driving Germany's economic resurgence, especially in the digitalization sphere.
The gloomy economic predictions for self-employed individuals in Germany are the result of various factors, such as the country's anticipated negative GDP growth of 0.4% in 2025, an expected unemployment rate of 2.9 million, and an inflation rate of 2.2%. These circumstances erode purchasing power, heighten business costs, and hamper consumer spending.
Additionally, heightened social security costs are projected to push the "shadow economy" upward by 800 million euros, as a result of an increase in contribution rates for statutory health insurance and pension insurance. Addressing Germany’s limited real growth, regulatory pressures, and inadequate response to digitalization are critical in improving the country's economic situation.
Jimdo CEO, Matthias Henze, warns of gravely concerning consequences if the deteriorating business climate continues. Germany lost around 430,000 self-employed individuals during the corona pandemic, and Henze fears the country is headed for similar dramatic outcomes if the trend persists.
The challenging business climate for self-employed individuals in Germany is also impacting their ability to secure loans from banks, further exacerbating their financial struggles. This trend in banking practices is causing concern, as it could potentially lead to more businesses closing and further unemployment in the service sector.
To mitigate the effects of the ongoing economic turmoil, there have been calls for policy changes, with the Association of Founders and Self-employed Germany (VGSD) advocating for a focus on digitalization and easing regulatory pressures as key solutions.