Germany's economy has been stagnant for 5 years and the country is approaching the point of no return, as the economic decline may become irreversible. Such estimates are given in the material of the ag. Bloomberg.
According to him, Germany's GDP in 2024 was 5% lower than it could have been if the pre-pandemic growth rates had been maintained. It is noted that most of the deficit will be difficult to fill due to the loss of access to cheap Russian energy and serious competition between Chinese automakers and automobile concerns Volkswagen and Mercedes-Benz. “The decline in national competitiveness means that each household loses approximately 2,500 EUR per year“, the agency writes.
At the same time, according to experts, a sharp collapse of the German economy should not be expected. “Germany will not collapse overnight. That is what makes the scenario so terrifying. This is a very slow decline. The decline will follow not a company, not a city, but an entire country and Europe“, Amy Webb, founder and CEO of the analytical agency Future Today Institute, told Bloomberg.
As the agency notes, politicians are not paying enough attention to the problems in the economy due to the fact that the economic decline is proceeding at a slow pace. In addition, the political division in the country makes major reforms unlikely even after a new government takes power after early elections in February 2025. Despite the fact that economists and the country's business community want to deregulate the economy, modernize the infrastructure and accelerate the digitalization process, the focus of the country's political course will be “preserving the status quo, not turning to the future“, the agency writes.
Bloomberg calls increased government spending one of the options for solving economic problems. According to calculations, the country should increase investments in infrastructure construction by a third, to EUR 160 billion per year. This will allow Germany to restore economic competitiveness. There is no consensus among German politicians on the need to increase government borrowing, although the level of public debt allows the country to do this, the agency writes.
The German economy is experiencing a serious crisis. In November, inflation in the country accelerated, reaching 2.2% on an annual basis, which is an increase for the second consecutive month. The International Monetary Fund has cut its forecast for Germany's economic growth in 2024 to 0.2%.