According to the OECD, the German economy is lagging behind internationally

The German economy is only getting out of the valley with difficulty. Due to global risks for the global economy, experts expect only moderate growth in 2024.

Berlin – The OECD predicts Germany will experience lower economic growth in 2024 than almost all other industrialized countries. Gross domestic product is expected to increase by only 0.6 percent due to weak exports, according to the “Economic Outlook” published on Wednesday by the Organization for Economic Co-operation and Development (OECD).

OECD economist: “The German economy is currently in a difficult phase”

Only in the neighboring Netherlands is the increase likely to be even lower at 0.5 percent. For comparison: the average growth of the 38 industrial nations united in the OECD is estimated at 1.4 percent. In 2025, Germany is expected to remain below the average of 1.8 percent at 1.2 percent. In the coming year, Europe’s largest economy is expected to shrink by 0.1 percent, while the OECD as a whole can expect growth of 1.7 percent.

“The German economy is currently in a difficult phase,” OECD economist Isabell Koske told the Reuters news agency. “The energy crisis hit Germany more than other countries because industry plays a more important role in this country and dependence on Russian gas was much higher than in other countries.”

High inflation has also reduced the purchasing power of households and thus affected consumption. “The budget crisis is also unsettling companies and consumers,” said Koske. With reference to the debt brake, the Federal Constitutional Court has decided that the 60 billion euros originally approved as a Corona loan in the 2021 budget may not be subsequently reallocated for investments in climate protection and the modernization of the economy.

It is therefore crucial to “solve the budget crisis as quickly as possible in order to give companies and households planning security and confidence in the future,” said Koske. A solution should include cuts in expenditure, increases in revenue and a reform of the debt brake.

The OECD has been recommending a reform of the debt brake for years

Politicians should therefore consider whether subsidizing early retirement through pensions at 63 is still appropriate given the shortage of skilled workers. “On the revenue side, expensive and distorting tax benefits should be cut, especially climate-damaging subsidies,” said the OECD expert, citing as examples company car privileges, diesel subsidies and commuter allowances, but also the gift and inheritance tax allowances and exemptions for business assets. The OECD has been recommending a reform of the debt brake for years in order to create more flexibility for key future investments.

“If the political leaders can now quickly agree on a solution to the budget crisis and make the necessary improvements in public administration and reduce bureaucracy, I am confident that the German economy will recover well,” said Koske. Interest rate cuts by the European Central Bank (ECB) would help. “But it is even more important to bring inflation back down to the ECB’s target over the long term,” said the expert. “This requires high interest rates for a certain period of time.” However, German companies are less dependent on loans to finance their investments because they have high savings, which have accumulated in recent years due to the high export surpluses. (reuters, dpa, lf)