Inflation, economic uncertainty, wars: After the difficult years of the pandemic, 2023 did not bring any noticeable upswing for many people. What will 2024 be like?
Economy and purchasing power
The good news first: Numerous economic research institutes expect inflation to weaken significantly in 2024. The Council of Economic Experts forecasts an increase in consumer prices of just 2.6 percent and moderate growth of 0.7 percent for the new year.
KfW chief economist Fritzi Köhler-Geib expects that the new year will therefore be better financially than previous years. “However, it will still take some time until the real income losses of previous years are made up overall. If everything goes well, then it could be at the end of 2025,” says Köhler-Geib.
Real wages have recently risen faster than consumer prices. Experts therefore expect an improvement in purchasing power and a recovery in consumers’ moderate spending mood.
Minimum wage and citizen’s allowance
The minimum wage will also go up for employees in 2024. It will rise by 41 cents to 12.41 euros on January 1st. Even if industry-specific minimum wages are set in collective agreements, many employees can look forward to an increase, including roofers, building cleaners, painters and nursing assistants and specialists. There is also a plus for trainees after the turn of the year. The minimum salary in the first year of training increases from 620 to 649 euros.
Citizens’ allowance will also be adjusted in the new year. The standard rate is adjusted annually to reflect prices and wages. For more than five million adults and children receiving basic income, citizens’ benefit will increase by an average of twelve percent. For single parents, for example, it is increased by 61 to 563 euros. Adults who live with a partner receive 506 euros.
Pensions and parental allowance
Pensioners in Germany will have more in their wallets from July 1, 2024. According to an official estimate, they can expect an increase of 3.5 percent. This emerges from a draft of the federal government’s pension insurance report, which is currently still being voted on. The final value of the increase will be determined in the spring.
There is also a supplement for the disability pension: Anyone who retired between 2001 and June 2014 receives 7.5 percent more. If the start of retirement was between July 2014 and 2018, there is an increase of 4.5 percent. In total, around three million pensioners benefit. The additional income limit also increases.
Changes await young families. In the future, only parents who have a taxable income of less than 200,000 euros in the calendar year before the birth of their child will be able to receive parental allowance. Previously the limit was 300,000 euros. In 2025 the limit is to be lowered further to 175,000 euros.
Steer
For citizens there will be more net than gross in 2024. The basic tax allowance, i.e. the income up to which no tax has to be paid, increases from 10,908 to 11,604 euros. The tax allowance for children will also be increased. The benchmark for the top tax of 42 percent rises to 66,761 euros (2023: 62,810 euros).
For some employees, however, social security contributions will also rise in the new year. Due to the increase in the contribution assessment limit, the contribution to health and nursing care insurance for legally insured high earners increases: with a gross income of 60,000 euros by 16 euros annually, with 70,000 by 234 euros, with 90,000 by 488 euros, with 100,000 by 552 euros.
Health
Health insurance contributions may rise slightly in 2024. The federal government has increased the reference value by 0.1 points to 1.7 percent. However, the exact amount is determined by the health insurance companies themselves. The Techniker Krankenkasse, the largest in Germany with eleven million insured people, wants to keep its contribution stable (1.2 percent). DAK Gesundheit also leaves its additional contribution unchanged (1.7 percent). Barmer is currently planning a significant increase. The second largest health insurance company, with more than eight million insured people, wants to increase its additional contribution by 0.69 percentage points to 2.19 percent.
Many privately insured people also have to expect premium increases. According to an estimate by the Association of Private Health Insurance, costs will increase by an average of seven percent.
Restaurant visits
Visiting restaurants and cafés could also become more expensive. From January 1st, the normal rate of 19 percent will apply again in the catering industry instead of the temporarily reduced VAT rate of 7 percent. It can therefore be assumed that restaurateurs will pass this on to customers.
Heating, electricity and petrol
Energy will remain an issue that puts pressure on wallets in 2024. The comparison portal Check24 expects gas costs of 2,537 euros in 2024 for a model household with an annual consumption of 20,000 kilowatt hours. That is 370 euros more than in 2023. The largest share of this, at 217 euros, is the increase in the VAT rate from 7 to 19 percent on March 1st. In the model calculation, the increase in the CO2 price at the turn of the year and the expiry of the price brake, which capped the price of work above a certain level, also result in higher costs.
The price cap for electricity will also be lifted at the turn of the year. Network fees are also rising significantly. According to Check24, the electricity costs for a model household with an annual consumption of 5,000 kilowatt hours are expected to increase by 144 euros next year. However, many energy suppliers have recently announced price reductions due to lower procurement prices.
Rising fuel costs are also to be expected. According to the ADAC, a liter of gasoline could become around 4.3 cents more expensive due to the increase in CO2 prices at the turn of the year. Diesel drivers can expect an increase of around 4.7 cents.
Insurance and mobility
There are also price increases for insurance companies. According to Verivox’s motor vehicle insurance index, contracts have become on average 13 percent more expensive. Building insurance premiums are also likely to increase. The cause is increased craftsmanship, material and construction costs due to high inflation.
It is not yet certain what will happen next with the Germany ticket and whether the introductory price of 49 euros will remain. The contribution could increase in mid-2024. In any case, flying becomes more expensive. The federal government plans to increase the ticket tax for passenger flights. The height depends on the length of the route. How much additional costs consumers will incur as a result is still unclear.
