Panorama econòmic

Economic indicators

Germany is the top economic power in Europe and the fourth globally. Nevertheless, the country was severely affected by the consequences of the Russia-Ukraine conflict: prior to the invasion, Germany was highly dependent on Russian gas, oil and coal, with around one-third of its primary energy supply coming from Russia. After growing 1.8% in 2022, Germany’s GDP contracted by an estimated 0.5% in 2023 (IMF, -0.3% as per the EU Commission figures) as industrial production extended its downturn in Q3, following a sluggish first half of the year. Furthermore, elevated inflation eroded purchasing power, adversely affecting private consumption, while export volumes contracted as economic conditions weakened in Germany's primary trading partners. The country anticipates a modest recovery in 2024: the resurgence is expected to be fueled by increased growth in the domestic consumer services sector, while the manufacturing sector's outlook hinges on foreign demand. Despite persistent supply chain challenges, their impact has notably diminished in 2023 and is projected to have only a limited effect on production in 2024. Furthermore, Germany is not foreseen to encounter an energy crisis during the winter of 2023-2024, in contrast to the preceding year. Overall, the IMF forecasts growth at 0.9% this year and 2% in 2025. In terms of demand, the revival is expected to stem from personal consumption, constituting 52% of GDP (Coface), as a result of the wage increase determined by the collective bargaining agreements reached in early 2023.

The unprecedented measures taken to fight the pandemic and stabilise the economy, followed by several energy support packages, drove an increase in Germany’s budget deficit in recent years. The IMF estimated the federal government deficit at 2.4% of GDP in 2023 (from 2.1% one year earlier). In 2024, the government deficit is anticipated to decrease to 1.1% of GDP (1.6% as per the EU Commission). Besides the discontinuation of energy-related measures, fiscal consolidation will be aided by robust growth in government revenue. However, several tax initiatives, including addressing 'tax bracket creep', boosting child allowances, and supporting companies for growth, will negatively impact government revenue. The 2025 projection foresees a further reduction in the government deficit to 0.6% of GDP (IMF). Nevertheless, the Supreme Court's November decision regarding the Climate and Transformation Fund (KTF) could potentially impact the utilization of other special funds, which might necessitate additional financing for their spending plans through increased revenues and cuts in other areas, potentially resulting in further fiscal tightening. The national debt brake was reinstated in 2023 after suspension during 2020-2022 (when the debt-to-GDP ratio stood at 66.1%), with the ratio decreasing to 65.9%. Overall, government debt is expected to gradually decrease over the forecast horizon, to around 59.9% by 2026 (IMF). After peaking in 2022, annual inflation decelerated steadily over the past year, with an overall level estimated at 6.3% by the IMF. The reduction was primarily influenced by the fall in wholesale energy prices and the implementation of energy measures. Looking ahead, the slowdown in inflation is expected to persist, though at a slower pace, reaching 3.5% in 2024 and 2.2% the following year. Temporary support for inflation, particularly in the services sector, is anticipated due to ongoing wage growth. Concurrently, the role of energy price growth should play a relatively minor role. Decreasing inflation and rising wages should support real incomes and private consumption over the forecast horizon.

Unemployment was estimated at 3.3% in 2023 (IMF), up from 3.1% one year earlier, with wage growth averaging 6.1% on an annual basis in the first semester. The IMF forecasts unemployment to remain at its current level in 2024, before easing to 3.1% in 2025. To tackle shortages in skilled labor, the OECD recommends enhancing work incentives for women, older individuals, and those with lower incomes, which could be achieved through improving training and adult learning programs and simplifying the recognition of qualifications for migrants and refugees. With a GDP per capita (PPP) of USD 66,038, Germany is among the wealthiest countries in the world (IMF, 2023). Nevertheless, according to data by Destatis, around 20.9% of the country's population is at risk of poverty or social exclusion: in 2022, 14.7% of the population was at risk of poverty, 6.1% was affected by severe material and social deprivation, and 9.7% was living in a household with very low work intensity.

Vols fer algun comentari sobre aquest contingut? Escriu-nos.