The ifo Institute is lowering its growth forecast for 2024. The reason is the federal government’s current austerity measures. According to employer president Dulger, companies have lost trust in them.
The economists at the Ifo Institute are becoming increasingly pessimistic about economic developments in Germany. The Munich experts are predicting that the gross domestic product will probably only grow by 0.7 percent this year. In mid-December they were still expecting an increase of 0.9 percent. Last year, Europe’s largest economy shrank by 0.3 percent.
“According to our estimate, additional savings amounting to almost 19 billion euros have been decided with the federal budget now agreed in the budget committee,” said ifo economics chief Timo Wollmershäuser, explaining the new forecast. “Companies and households will be burdened more or less burdened, and government spending will be cut.”
The entire scope therefore roughly corresponds to what was estimated in a risk scenario for 2024. The economic impact is also likely to be of this magnitude, says Wollmershäuser.
Hope only in the second half of the year?
The austerity measures became necessary after the Federal Constitutional Court declared the filling of the climate and transformation fund with unused credit authorizations to deal with the corona pandemic to be unconstitutional and void in November 2023. At the time the ifo economic forecast was drawn up in December, it was still completely unclear to what extent spending would be cut or taxes increased, according to the Munich institute.
Some economists are much more pessimistic than the ifo Institute. The trade union-affiliated Institute for Macroeconomics and Economic Research (IMK) expects a further contraction of 0.3 percent this year. “There is only hope for an economic recovery towards the second half of the year, when rising wages and further falling inflation support the purchasing power of private households,” said IMK scientific director Sebastian Dullien.
“It just doesn’t happen”
Meanwhile, employers’ criticism of the course of the traffic light coalition of the SPD, Greens and FDP is becoming increasingly harsh. “The companies have lost trust in the federal government,” said Rainer Dulger, President of the Confederation of German Employers’ Associations (BDA). “There’s just nothing happening.” Germany has to function again. The association and the state associations are now losing their patience, said Dulger .
Germany’s growth engine is increasingly becoming a brake on the European Union, said the employer president. There is no relief for companies, no planning security and no predictability, instead there is excessive bureaucracy, more and more regulations and more and more reporting requirements. There is also less investment.
Employers are disappointed
The state has raised expectations among citizens and companies that they can solve problems with money, said Dulger. The state can no longer meet these expectations. “And that’s why I can now understand more and more some angry citizens, and we employers are disappointed.”
The BDA President demanded that Germany’s competitiveness should be placed back at the center of political action. For employees in companies, there must be more net than gross, and the welfare state must also be reorganized.