Germany is set to be at the bottom of the class when it comes to economic growth. Economics Minister Robert Habeck was the bearer of bad news when he delivered the Autumn forecast. This is Berlin’s pre-winter health check of how things look in the business world of the EU’s largest economy, and figures have had to be considerably revised.
It had been expected that Germany would grow by around 0.4 percent by the end of this year, clawing its way out of the recession that has gripped the country since the final quarter of 2022. However, with this latest forecast, the economics minister and also vice chancellor had to prepare the nation for an overall contraction of 0.4 percent for 2023.
This would mean that Germany is starring down the barrel of being the only major world economy to post negative growth figures for this year.
In telling the German people that there will be more months of financial crisis ahead, Habeck has also defended the action taken by the country’s coalition government, which includes his Green Party and the Free Democrats, but is led by the Social Democrats and Chancellor Olaf Scholz.
German Economy and Climate Minister Robert Habeck holds a press conference about the autumn economic forecasts in Berlin. /Liesa Johannssen/Reuters
German Economy and Climate Minister Robert Habeck holds a press conference about the autumn economic forecasts in Berlin. /Liesa Johannssen/Reuters
Instead, the economics minister blamed Germany’s slow recovery on the “aftermath of the energy price crisis, the ECB’s need to combat inflation and the weakening of important global economic partners.”
Habeck has also been keen to avoid talking down the German economy in recent weeks. Last month he wrote an article in the Economist in which he said Germany was not the “sick man of Europe”, but did acknowledge that the economy was “just a little out of shape.”
This poor report card from the economics ministry was expected. Last month, the world’s leading research institutes revised their expectations, and on Tuesday this week, the IMF said they expected Germany to contract by 0.5 percent in 2023.
The German government expects to see growth return in 2024 and 2025 with figures of 1.3 and 1.5 percent, respectively, but those figures should be tempered by the IMF’s prediction of a far more reserved 0.9 percent growth for 2024. To grade on a curve, the IMF put France on track to grow by 1.3 percent in 2024 and the USA at 1.5 percent.
So, how do we fix a problem like the German economy? According to Habeck, Germany needs to slash bureaucracy and make it easier for skilled workers to move to the country. It currently takes an average of 120 days to get an operating licence for a new business in Germany, compared to 40 days in Greece and Italy.
Construction permits take 50 percent longer here than in any other OECD nation. BioNTech shot to fame and fortune during the COVID-19 pandemic with their vaccine. Still, biotech firms have moved away from Germany because of the red tape that must be negotiated to conduct drug trials.
On Friday finance minister Christian Lindner (FDP) will unveil his “Growth Opportunities Act” in it’s first reading before the Bundestag. Business is worried that this will set out taxes set to make the government a cool $7.44 billion in tax revenue each year from Germany’s biggest, best and brightest in the business world. Expect a reaction from them following that.
There is some good news in the Autumn forecast. While inflation for 2023 looks like it will finish around 6.1 percent, the Economics Ministry expect that to roll back to 2.6 percent for 2024 and 2.0 percent for 2025. The ECB has a eurozone target of 2 percent for member states.
