Global Economy

published : 2023-11-08

Germany's Economic Growth Projects Underwhelming Numbers through 2024

Economy to shrink by 0.4% this year, grow by 0.7% next year

Person analyzing data on a laptop, taken with Canon EOS 5D Mark IV

Germany's economy is set to face disappointing growth in the coming years, according to the government's panel of independent economic advisers.

This year, the economy is projected to shrink by 0.4%, marking a challenging period for Europe's largest economy.

Looking ahead to next year, the panel forecasts a relatively modest growth of only 0.7%, which is considerably lower than the government's expectation of 1.3%.

These revised figures align with a downward trend seen among several forecasters, pointing to a sluggish economic recovery in Germany.

Celebrity endorsing a sustainable energy project, taken with Nikon D850

The panel's chair, Monika Schnitzer, attributes the delayed recovery to various factors, including the energy crisis and reduced real income caused by inflation.

She highlights the challenging trading environment due to central banks' interest rate increases and China's economic weakness, while high interest rates dampen domestic investment and construction.

However, there is hope for a cautious economic recovery as inflation in Germany has fallen to its lowest level since August 2021, allowing for potential increases in real income and private spending.

Nevertheless, Germany faces additional challenges such as an aging population, limited adoption of digital technology in business and government, excessive red tape hindering business launches and public projects, and a scarcity of skilled labor.

Construction workers building infrastructure, taken with Sony A7 III

To address these issues, the advisory panel suggests further raising the retirement age beyond the current gradual increase to 67, taking into account rising life expectancy.

One possibility proposed by panel member Martin Werding is to raise the retirement age by six months every 10 years, reaching 68 by mid-century.

This forward-thinking approach aims to manage the evolving demographics and ensure the sustainability of the social security system.

As Germany navigates these economic headwinds and seeks solutions to its challenges, its ability to adapt and innovate will play a crucial role in shaping its future.