Status: 29.11.2023, 16:52 PM
The Port of Hamburg: The German economy is going through difficult times. © Wolfgang Rattay / dpa
The German economy is struggling to get out of the valley. Experts expect only moderate growth in 2024 due to global risks to the global economy.
Berlin - The OECD predicts that Germany's economic growth in 2024 will be lower than that of almost all other industrialized countries. Gross domestic product is expected to increase by only 0.6 percent due to weakening exports, according to the "Economic Outlook" published by the Organisation for Economic Co-operation and Development (OECD) on Wednesday.
OECD economist: "The German economy is currently in a difficult phase"
Only in the neighbouring Netherlands is the increase likely to be even smaller, at 0.5 percent. By way of comparison, the average growth rate of the 38 industrialized nations in the OECD is estimated at 1.4 percent. At 2025.1 percent, Germany is likely to remain below the average of 2.1 percent in 8. Europe's largest economy is expected to shrink by as much as 0.1 percent in the year that is coming to an end, while the OECD as a whole can expect growth of 1.7 percent.
"The German economy is going through a difficult phase right now," OECD economist Isabell Koske told Reuters. "The energy crisis has affected Germany more than other countries, as industry occupies a more important place in this country and dependence on Russian gas was much higher than in other countries."
High inflation has also reduced the purchasing power of households and thus affected consumption. "In addition, the budget crisis is unsettling companies and consumers," said Koske. With reference to the debt brake, the Federal Constitutional Court has ruled that the 60 billion euros originally approved as a Corona loan in the 2021 budget may not be retroactively reallocated to investments in climate protection and the modernisation of the economy.
Therefore, it is crucial "to solve the budget crisis as quickly as possible in order to give companies and households planning security and confidence in the future," said Koske. One solution should include cuts in spending, increases in revenue and a reform of the debt brake.
The OECD has been recommending a reform of the debt brake for years
For example, politicians should consider whether subsidizing early retirement through retirement at 63 is still appropriate in view of the shortage of skilled workers. "On the revenue side, expensive and distorting tax breaks should be cut, especially climate-damaging subsidies," said the OECD expert, citing as examples the company car privilege, diesel subsidy and commuter allowance, but also the allowances for gift and inheritance tax and the exemptions for business assets. For years, the OECD has been recommending a reform of the debt brake in order to create more flexibility for key investments in the future.
"If the political leaders can now quickly agree on a solution to the budget crisis and push ahead with the necessary improvements in public administration and a reduction in bureaucracy, I am confident that the German economy will recover well," said Koske. Interest rate cuts by the European Central Bank (ECB) would help. "But it is even more important to bring inflation back down to the ECB's target on a permanent basis," the expert said. "This requires high interest rates for a certain period of time." However, German companies are less dependent on loans to finance their investments, as they have high savings, which have accumulated in recent years due to the high export surpluses. (reuters, dpa, lf)