Germany needs ‘reliable economic policy decisions,’ the center urged
Germany needs “reliable economic policy decisions” for sustainable growth, a leading economic center said on Thursday.
The Munich-based ifo Institute said gross domestic product (GDP) could rise to 1.1% next year if policymakers can reduce uncertainty about the outlook for the German economy, which they argue has “caught investors and consumers for years.”
Policies to promote growth include “a lower tax burden on companies and lower office and energy costs, expansion of digital, energy and transport infrastructure and increased labor supply,” the agency said.
Failure to make the necessary decisions could leave Germany’s growth at 0.4% in 2025, the report said.
Deep divisions over Germany’s economic stagnation have brought down Chancellor Olaf Scholz’s coalition, as new elections are expected in February.
“At the moment, it is not clear whether this phase of stagnation is temporary weakness or permanent,” said ifo economist Timo Wollmershäuser.
The agency said that German businesses are struggling due to a lack of demand, as consumers continue to lose purchasing power following the period of inflation, and wages fail to keep up with it.
Meanwhile, orders from abroad have also declined, despite the general economic recovery around the world.
If German policymakers fail to act, the firm warned, there is a risk of “deindustrialization” in which German companies move production and investment abroad.
Structural changes away from industry and more services will hamper productivity, with a short-term increase in unemployment expected and growth remaining at an unfavorable 0.8% in 2026.
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