German economy is stagnating: financial expert calls for effective economic policy

German economy is stagnating: financial expert calls for effective economic policy

German economy is stagnating

According to figures from the Federal Statistical Office, the German economy stagnated in the second quarter. Gross domestic product (GDP) neither shrank nor grew between April and June. Hubertus Bardt, Managing Director of the German Economic Institute (IW), sees high energy costs and rising interest rates as the main reasons for the weak development. He also complains about a pronounced pessimism regarding bureaucratic problems in Germany.

Economists had actually forecast an upturn for 2023, but the latest figures show that sentiment indicators were wrong at the start of the year. Bardt emphasizes that there are still concerns about Germany as an industrial location, as there is a risk of a weakening of the industry.

In order to counteract this development, Federal Minister of Economics Robert Habeck is proposing a state-subsidized reduction in industrial electricity prices. This is intended to create investment impulses in the energy-intensive industry. Bardt supports this proposal, but at the same time emphasizes that long-term ideas and effective economic policies are needed to solve the problems.

Source: According to a report from www.rnd.de

Analysis and implications

The stagnating German economy has an impact on the market and the financial sector. Due to the weak economy and low demand, companies are expected to invest less and produce less. This could lead to a decline in GDP and falling sales across the entire economic sector. Companies could rethink their business models and potentially lay off employees to reduce costs.

Rising interest rates are having an impact on the construction sector. The construction industry will likely be hit by higher interest rates and will see fewer building applications. This could lead to a decline in construction activity and a possible slowdown in the real estate market.

The high energy costs are a particular burden on industry. Companies in Germany have higher energy costs compared to the USA, which affects their competitiveness. This could lead to companies relocating locations abroad or limiting their production.

The pessimism of medium-sized companies towards bureaucratic problems is another factor that is weighing on the German economy. When companies are hindered by bureaucracy and regulations, they cannot conduct their business optimally and slow down innovation. This could lead to reduced competitiveness and job losses.

The state subsidization of industrial electricity prices proposed by Federal Economics Minister Robert Habeck could have positive effects on energy-intensive industry. This would reduce costs and encourage investment in this sector. This could lead to a strengthening of the industry and greater competitiveness.

Overall, effective economic policy is needed to support German companies and stimulate the economy again. Measures to reduce energy costs, relieve bureaucratic burdens and promote investment could help put the German economy back on a growth path.