Germany's economy in crisis: Where is the growth?

Germany's economy in crisis: Where is the growth?

The German economy is in stagnation and is falling behind many other industrialized nations. The latest data shows that Germany has barely grown in recent years and is clearly lagging behind in terms of labor productivity. Despite the Corona crisis, some countries are experiencing economic prosperity, while Germany is making little progress. The causes of this economic malaise are complex: a lack of digitalization, declines in industrial production and falling private and public investments are just some of the factors mentioned. The traffic light coalition faces major challenges in resolving these grievances, reports Time.

Growth potential unused

However, the situation could soon come to an end, experts from McKinsey believe. Their study on the “Growth Transition in Germany” shows that Germany could significantly increase its growth through a massive boost in investment and a focus on promising areas such as digitalization and artificial intelligence. The gross domestic product could double to up to 24 trillion euros by 2035, an absolute ray of hope for the ailing economy. However, almost 250 billion euros are currently flowing out of Germany annually, which suggests that investments at home are less attractive than abroad. The returns in the USA, for example, exceed the German returns by 30 percent, according to the management consultancy McKinsey notes.

In order to achieve the desired growth turnaround, investments amounting to 330 billion euros per year are necessary to create the necessary incentives for companies. Restructuring the economy towards dynamic future fields could help increase competitiveness and bring Germany back onto the international stage. However, according to the board members interviewed for the McKinsey study, this change will only succeed if politicians act decisively and create suitable framework conditions so that Germany becomes an attractive location for investments again.