Germany cannot get out of its growth slump. The Council of Experts is also expected to lower its economic forecast for 2024. In the annual economic report, the government only predicts stagnation.
The Council of Experts for the Assessment of Overall Economic Development (“Economy”) also assumes that the outlook for the German economy will be gloomy this year. Before the publication of the new annual economic report, economists announced that they would also lower their economic forecast.
Growth close to zero
As is already known, the government is cutting its growth forecast for this year from 1.3 to 0.2 percent in the annual economic report. This would mean that Germany would find itself in stagnation.
The Council of Experts, which advises the federal government, expects the German economy to grow by 0.7 percent so far in 2024. But even this meager growth will probably not be achieved in Germany this year, said the “economic expert” Ulrike Malmendier of the Reuters news agency. The five “economists” used their own calculation model, which already took into account the lower spending by the state.
Similar to the federal government, the experts also see minimal growth at best. “I think we will definitely go in the same direction,” said Malmendier, “that’s what our numbers currently indicate.” An updated forecast is announced for mid-May.
Technical recession possible
The economists at the Organization for Economic Cooperation and Development (OECD) are currently assuming that the German economy will grow by 0.3 percent this year. The forecast has therefore been halved. As recently as November last year, experts had assumed that the German economy would grow by 0.6 percent in 2024.
But even these assumptions may still be too optimistic. Some experts even believe that a second year in a row of shrinking economic output is possible. According to the Bundesbank, the German economy is at risk of another decline in gross domestic product in the current first quarter. Europe’s largest economy had already shrunk by 0.3 percent in the fourth quarter of 2023. Two negative quarters in a row are considered a technical recession.
The President of the Ifo Institute, Clemens Fuest, also sees Germany in long-term stagnation, as he explained in an interview with tagesschau24 a few days ago. The economist sees the traffic light coalition as partly to blame for the weak growth.
“We need migration”
Malmendier also referred to current developments that are inhibiting growth in the country – such as the recent wave of strikes in Germany. There are also structural problems. The number of hours worked is declining. The population is old and the younger generation wants to work less.
The only thing that helps here is immigration, “to be honest, the immigration of any worker who wants to work in Germany,” said Malmendier. The problem cannot be solved with domestic workers and more working hours for women alone. “That won’t be enough. We need migration.”
Debt brake instead Tax cuts
According to “Handelsblatt”, the annual economic report will contain a number of measures intended to make work in Germany more attractive. For example, a “family start time” is planned, during which mothers’ partners can apply for paid time off after the birth of a child. Recipients of state transfer benefits should therefore be able to earn more additional income.
However, according to the report, the federal government was unable to agree on tax cuts for companies. At the same time, the report contains a clear commitment to the debt brake.