The German economy is not getting going. Now, according to a report, the federal government has to admit: There will be no growth this year.
According to a media report, the federal government now expects the German economy to shrink this year too. The economic forecast will be revised significantly downwards, reported the “Süddeutsche Zeitung”. Economics Minister Robert Habeck (Greens) had originally expected a slight increase in gross domestic product of 0.3 percent for 2024 – now a minus of 0.2 percent is expected. Habeck wants to present the new forecast on Wednesday in Berlin.
The step does not come as a surprise, as the major economic research institutes had also recently revised their expectations downwards. They expect a minus of 0.1 percent this year. The main reason is uncertainty among companies and citizens. The persistently high level of interest rates is slowing down investments, companies are cautious due to the volatile economic and geopolitical situation, and private households are increasingly saving their income instead of investing in home ownership or consumption.
Experts are still optimistic
The President of the World Economic Forum, Borge Brende, is confident despite the economic slowdown. Germany has an industrial base and experience, he told the German Press Agency in Berlin. “This knowledge can easily be transferred from one area of the industry to new ones. It is in people’s minds, in organizations and institutions.”
Germany is already investing more in semiconductor technologies, cloud and data centers. In addition, the country was once considered Europe’s sick man around 20 years ago and has since found its way back to competitiveness with a series of structural reforms.
Recovery expected for 2025
Both the federal government and research institutes assume that the situation will gradually improve in the coming year. The economy should then grow again. However, the prerequisite is that the growth initiative planned by the traffic light government with tax improvements, work incentives and a reduction in bureaucracy takes off. So far only a fraction of this has been implemented.
“There is still a great need for action. A first, necessary step is the growth initiative of this federal government,” said Habeck to the “Süddeutsche Zeitung”. “The German economy can grow significantly faster in the next two years if the measures are fully implemented and can have their effect. Now is not the time for concerns, now is the time to act quickly.” The government fears that the federal states could slow down the measures because they will collect less taxes.
Debt brake problem?
Brende also warned not to let up on investments. While other countries have little scope for this due to high debts, the German budget restrictions are self-imposed in the form of the debt brake. This makes it more difficult to invest money in infrastructure or research and development or to provide start-up and venture capital. “There is no doubt that there is more capital available for start-ups in the USA than here in Europe.”
The left-wing politician Christian Görke blamed the financial policy of the traffic light government for the problems. Presenting an austerity budget would be wrong in this situation. Görke called for an “economic summit in the Chancellery where the financial policy blinders are removed.”
Source: Stern
