OECD forecast: mini-growth for Germany until 2024

OECD forecast: mini-growth for Germany until 2024

The OECD has again revised downwards its forecast for German economic growth in 2024. Experts only expect an increase of 0.2 percent for the current year. In comparison, there is expected to be an increase of 1.7 percent across the OECD, rising to 1.8 percent by 2025. The Eurozone will also record higher growth rates than Germany. This is mainly because the energy-intensive industry in Germany is more affected than in other Eurozone countries.

Another reason for the weak outlook is the restrictive fiscal policy in Germany. Measures such as the reintroduction of the debt brake and restrictions on financing expenditure will lead to a sharp decline in public spending in 2024. Uncertainty regarding the financing of planned projects is holding back companies' investment activity and affecting household consumption.

In order to improve the situation, the OECD recommends that the federal government clarify the financing of projects in the climate and transformation fund beyond 2024 in order to create planning security. Furthermore, environmentally harmful and distorting tax benefits could be eliminated in order to expand fiscal space. The OECD also proposes a reform of the debt brake to increase the scope for net investment and reduce bureaucracy.

In addition, it is suggested that taxes and social security contributions should be reduced for lower and middle income groups. This could be financed by eliminating distortive tax breaks, more effective tax enforcement and cutting spending in other areas. Improvements in tax enforcement and incentives for women to work could also help to stabilize the economic situation in Germany.