Depending on the economic policy of the next federal government, the Ifo Institute expects economic growth of 0.4 or 1.1 percent next year.
If the right economic policy course is set, growth of 1.1 percent could be achieved in 2025. However, if the German economy does not overcome its structural challenges, only 0.4 percent can be expected.
“At the moment it is not yet clear whether the current stagnation phase is a temporary weakness or a permanent and therefore painful change in the economy,” says Ifo economics chief Timo Wollmershäuser. In the more optimistic scenario, “more reliable economic policy” will help industry expand its production capacity again, invest more and cut fewer jobs. In this scenario, work incentives would also be improved, more people would work overall and employees would work more. This would then strengthen private consumption and ensure a lower savings rate.
Germany’s industry has lost competitiveness
Recently, German exports have become increasingly decoupled from global economic developments – the industry has noticeably lost its competitiveness. “The decisive factor will be whether the export-oriented German economy can benefit again from growth in other countries,” says Wollmershäuser. The Ifo Institute forecasts 1.2 percent growth in the euro area, 2.5 percent in the USA and a good 4 percent in China in 2025 and 2026.
In the more pessimistic scenario, there is creeping deindustrialization. Industrial companies are shifting production and investments abroad. Due to the structural change away from industry towards more services, productivity growth remains weak and a temporary increase in unemployment is to be expected. Slight growth impulses come from a slow recovery in private consumption and the construction sector.
The poor order situation is having a negative impact on the economy, says Wollmershäuser. But purchasing power has now returned. Inflation is expected to fall to 2.3 percent next year and to 2.0 percent in 2026. (dpa)