The German economy is recovering poorly from the energy crisis – but the expected recession is not the biggest problem for important advisors to the federal government. In their annual report presented on Wednesday, the economists warn of structural weaknesses: In view of insufficient investment, a lack of workforce and too few young, innovative companies, there is a risk of a growth slump that will last for decades. One of their proposed solutions concerns the retirement age.
Forecast for 2023: Economy is shrinking
The experts assume that economic output will decline this year and will hardly grow next. “The economic recovery in Germany is being delayed,” said the chairwoman of the Advisory Council, Monika Schnitzer. It is being slowed down by the consequences of the energy crisis and inflation. Higher interest rates resulted in less investment and construction activity. Experts therefore expect the economy to shrink by 0.4 percent this year. The federal government and the leading economic research institutes recently made similar forecasts.
According to the forecast, inflation will decrease and private consumption will increase in the coming year. However, the global economy – especially in China – is recovering only slowly. The export-oriented German economy is particularly affected by this. That’s why economists only expect growth of 0.7 percent. This makes them more pessimistic than the federal government and institutes, which expect an increase of 1.3 percent.
Growth prospects poor
The medium-term growth prospects of the German economy are at a historic low, said economist Veronika Grimm. This is mainly because workers are becoming scarce. “The development is of course not set in stone, but it is clear that economic policy decisions are necessary in a timely manner to improve the growth prospects,” emphasized Grimm. We need to get more women, older people and skilled workers from other countries into the job market.
Suggestion: retire at 68 – but not yet
The economist Martin Werding gave past governments a slap in the face. They have let the problem of demographic development slide for far too long: baby boomers who no longer work and at the same time receive longer and longer pensions because of higher life expectancy. One adjustment screw is raising the retirement age – and linking it to increasing life expectancy. Living a year longer should mean working eight months longer. In concrete terms, this means that in 2051 the pension would only be available at the age of 68.
Problem: Aging industry
The economists warn: In the coming decades, Germany is threatened not only with an aging population, but also with industry, because too little is being modernized. “Investments are of crucial importance in getting the German economy back on a sustainable growth path,” emphasized Grimm. The rates are currently declining in all sectors of the economy. Modern systems can replace missing workers and are more productive. The economy also needs to be more open to the use of artificial intelligence.
Green party leader Katharina Dröge promised an investment offensive for a modern business location. “The debt brake must not be a brake on investment.” This time, the economists did not make a joint statement on the debt rule in the Basic Law. But Schnitzer said that she personally thinks it is fundamentally correct. Socio-economist Achim Truger emphasized that even with the debt brake there are opportunities to invest more, for example through the exception rule and leeway in the budget.
Economics Minister Robert Habeck admitted that further measures were necessary in order to “take advantage of growth opportunities”. The Council of Experts rightly points out the high investments that Germany as an economy must make in the course of the climate-neutral restructuring.
Wish: Stronger equity culture
Economist Ulrike Malmendier criticized Germans as far too much savers and did not dare to enter the capital market. The following applies: “More capital investments create more promising companies.” This is the most important and fastest effective lever for stimulating the German economy. Insurance companies or pension funds would have to get involved more and finance promising companies even in later growth phases. “If only two out of ten companies function, and one perhaps even becomes the next German global company, then it will be worthwhile for the German economy, for the investors, for everyone.” This works well in other countries such as the USA or Sweden.
Idea: Start-up capital for six-year-olds
Economists advise that young people should also practice trading on the stock market. Young people should receive state start-up capital, around ten euros a month from the age of six, to invest in broad-based equity funds – with the support of schools and parents. This increases financial literacy and children lose their fear of contact.
Annual report
