Bavaria's economy is in ruins: bureaucracy is costing us billions!

Bavaria's economy is in ruins: bureaucracy is costing us billions!

The Bavarian economy remains in a deep stagnation, which is exacerbated by a combination of bureaucracy, lack of demand and difficult economic policy conditions. This is confirmed by the current BIHK economic survey, which shows a persistently gloomy mood among Bavarian companies. The Bavarian State Newspaper reports that the bureaucracy imposes costs on companies in Germany amounting to 145 billion euros annually, of which 27 billion euros are incurred by Bavarian companies.

The decline in jobs in Bavaria is particularly alarming: 30,000 people have lost their jobs in the last three years. The BIHK economic index, which is based on the assessments of 3,600 companies from various sectors, rose slightly by 5 points to 104, but remains well below the long-term average of 112 points. Companies continue to rate their current business situation as poor, with a balance score of 8 points, which is 47 points below the 2018 peak. Pessimism among companies is increasing, especially in industry.

Challenges and weak expectations

Manfred Gößl, the general manager of the Bavarian Chamber of Industry and Commerce (BIHK), said that despite a slight increase in the economic index, there are no signs of a trend reversal. Companies' expectations rose by 9 points, but only reached zero - a pessimistic picture compared to the previous year, as expectations have been below the long-term average since spring 2022. This represents a negative record since surveys began in 1993.

Although the service sector and tourism show a slightly positive value, expectations in these areas have deteriorated compared to the previous year. The tourism sector in particular is suffering from customers' savings behavior and declining restaurant visits. The construction industry is also not yet showing a positive trend and is having difficulty reaching “the ground floor”.

Risks and demands for reform

Another central issue is the high non-wage labor costs, which 42% of the companies surveyed stated as the biggest challenge for the next 12 months. Unemployment in Bavaria, currently at 3.6%, is expected to continue to rise in 2025. The problem is further exacerbated by the trade barriers discussed and the reversal of globalization in Germany, which could lead to a decline in order volume in North America. Experts warn of possible damage to the German economy, which could amount to between 10 and 60 billion euros.

Calls for effective reforms are gaining momentum. BIHK President Klaus Josef Lutz is calling for a reduction in corporate tax, the expansion of tax depreciation for investments and a reduction in electricity tax to the European minimum. There is also a call for a reduction in bureaucracy, which, according to an ifo study commissioned by the IHK Munich, could bring Germany up to 146 billion euros in additional economic output annually. Finally, the need for economic policy decisions to promote growth is emphasized in order to counteract stagnating developments. The BIHK highlights that the Bavarian economy is at a crossroads and massive reforms are urgently required.