Weak economic development in Germany: Financial expert warns of long-term decline in growth.

Weak economic development in Germany: Financial expert warns of long-term decline in growth.

According to a report by amp.zdf.de, leading economists in Germany are predicting weak economic development. The German Institute for Economic Research (DIW), the Kiel Institute for the World Economy (IfW) and the Leibniz Institute for Economic Research (RWI) all assume that annual growth rates will be below one percent in the medium term - and therefore much lower than the average of the past thirty years.

The reasons for the weak economic growth are varied. DIW President Marcel Fratzscher explains that the weakening of the economy is due to our own failures and has little to do with the war in Ukraine or the corona pandemic. Potential growth is expected to fall to below 1.0 percent this decade, primarily due to the decline in employment due to demographics and a shortage of skilled workers.

According to the DIW and the IfW, there have been four major economic policy mistakes in Germany in the past 20 years, including a failed ecological transformation and excessive bureaucracy. These failures have hindered private investment and led to a government investment deficit. In addition, the problem of skilled workers will worsen significantly in the coming years and pose an existential threat to many companies.

The aging of society is also a problem, according to economists from the IfW and the Leibniz Institute. An old society is typically less able to adapt new technologies, which could further impact economic growth.

The RWI's medium-term projection suggests that potential output growth will decline from 1 percent this year to 0.6 percent in 2027. This will probably also lead to a decline in the expected growth rates of the gross domestic product.

Given all these factors, it is likely that the German economy will face significant challenges in the coming years. It would be critical for governments, businesses and economists to take action to address these challenges and increase the potential for future economic growth.