The German economy will grow next year, but it is not yet clear how strongly. The Ifo economic institute said in its outlook today that there are two scenarios under which the economy will grow by either 0.4 percent or 1.1 percent. It depends on how Germany copes with its structural problems and whether it manages to set the right economic policy.
Exports are key
“It is not clear at this point whether the current phase of stagnation is a temporary downturn or a permanent and therefore painful change in the economy,” said Timo Wollmershäuser, chief forecaster at the Ifo Institute. “The decisive factor will be whether the German economy, which is export-oriented, can once again benefit from growth in other countries,” Wollmershäuser also said.
In its outlook, Ifo estimates economic growth in the eurozone at 1.2 percent over the next two years, in China at four percent and in the United States at around 2.5 percent. However, according to the Ifo forecaster, German exports have been losing pace with the global economy in recent years and industry in particular has been losing competitiveness.
Two scenarios for the future of the German economy
In the pessimistic scenario, developments will lead to a gradual deindustrialisation of Germany. Industrial enterprises will shift production and investment abroad. In this case, according to the Ifo, a temporary rise in unemployment would have to be expected. In an optimistic scenario, sound economic policy will contribute to industrial enterprises expanding production and investing more, for example through tax incentives. Fewer jobs would be lost. In this scenario, private consumption would be boosted.
The German economy is the largest in Europe, but in recent months it has faced a number of problems, including in the automotive, chemical and steel industries. It should return to growth next year, with gross domestic product (GDP) expected to rise by 1.1 percent, according to the government’s outlook. The International Monetary Fund (IMF) is forecasting GDP growth of 0.8 percent in Germany next year.
Source – Czech press office
