German economy ahead of a long phase of weakness
Munich
According to prominent economists, the German economy is facing years of weak growth. The German Institute for Economic Research (DIW) in Berlin, the Kiel Institute for the World Economy (IfW), the Leibniz Institute for Economic Research (RWI) in Essen and the Ifo Institute in Munich all assume that the annual growth rates will be below one in the medium term will lie – and thus much lower than the average of the past thirty years.
“Economic growth in Germany is likely to be significantly weaker in this decade than in the supposedly economically successful 2010s,” said DIW President Marcel Fratzscher. “The weakening of Germany’s economic potential is due to its own failures and has little to do with the war in Ukraine or the corona pandemic.”
Fratzscher: Growth potential could drop even more
The potential growth for the German economy is likely to drop to below 1.0 percent in this decade. This is mainly due to the decline in employment due to demographics and a shortage of skilled workers, said Fratzscher. “If the dormant transformation should lead to de-industrialization, then the growth potential could drop even more.”
In the past 20 years, Germany has made four major economic policy mistakes. The DIW President criticized the “failed ecological transformation so far, which has meant that Germany is far too dependent on fossil and very expensive energy imports and has overslept the technological transformation to sustainable and innovative technologies” as the greatest failure.
The second mistake is excessive bureaucracy and vested rights, which hamper private investment. “The third mistake is the state investment deficit, which has meant that the German state has been living off its substance for a long time.” Fratzscher named a deteriorated education system and an inadequate infrastructure. According to Fratzscher, the problem of skilled workers as the fourth weakness WILL intensify significantly in the coming years and pose an existential threat to numerous companies.
Kooths: Not the end of the road yet
At the IfW Kiel, Vice President Stefan Kooths says: “Over the past thirty years, we have had an average annual growth rate of 1.4 percent.” The medium-term projection of the IfW shows a decline to below 0.7 percent by 2027.
“It’s not the end of the road,” said Kooths. “That means: What we were used to in the past WILL shrink to a third in the relatively short term. The reason for this is the demographic development.” An old society is, for example, less able to adapt new technologies. “That could again mean a discount on productivity development.”
In addition, Kooths expects that the switch to a climate-neutral energy supply will cost the company large sums of money. Therefore, even the clear revision of the growth figures is “rather an estimate at the upper end”. Germany is also “running into significant distribution conflicts because the baby boomer generation is retiring,” said Kooths.
Am R. EssenWI IS all assessment over the years.
Schmidt: The main cause is a reduction in the labor force potential
According to the RWI’s medium-term projection, growth in production potential is likely to decline from 1 percent this year to 0.6 percent in 2027. “The expected growth rates for gross domestic product are likely to fall accordingly,” said Schmidt. “The main cause is the decline in the potential labor force.” Schmidt also mentions the high costs of saying goodbye to fossil energy: “But we also assume that the restructuring of the capital stock necessary to achieve the climate policy goals will dampen the increase in production potential.”
The Munich-based Ifo Institute expects growth rates in German economic output to be between half a percent and a quarter of a percent by the end of the decade under normal circumstances. “The German economy said that even without the various crises, a slower or weaker growth path would be imminent,” Ifo economic researcher Robert Lehmann.
Lehmann: Digitization mitigates some of the burden
The baby boomer generation is retiring from the workforce. Since fewer people are entering the workforce, it is no longer possible to compensate for the retirement of older people. “This means that the shortage of skilled workers that is already being looked after will increase even more noticeably in the coming years.” Lehmann sees expensive energy as an additional obstacle.
The economic researcher does not want to paint it black: Opportunities could also have grown or have already grown from the corona pandemic. As an example, Lehmann cited the accelerated digitization, “which can at least partially alleviate the burden of demographic change.”
According to Lehmann, demographic change and weaker growth could also fuel inflation: “In the transitional phase, when the baby boomers retire, the consumers and their consumer mood initially remain quite stable, leading to a significant boost in consumption.” Production opportunities and economic growth but would be lower.”Both can lead to significant price increases in the medium term.”
Notice: This report is part of an automated service from the German Press Agency (dpa), which works according to strict journalistic rules. It WILL NOT be edited or checked by the AZ online editors. Please send questions and comments to [email protected]
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