BDI: Economic standstill in Germany, gap to global economy widening
The Federation of German Industries (BDI) is forecasting marginal economic growth of 0.3% for Germany in the current year, while the global economy is expected to grow by 2.9%. "Germany's economy is at a standstill. Compared to most other major industrialized countries, our country is falling further behind. We do not see any chance of a rapid recovery in 2024," said BDI President Siegfried Russwurm in Berlin.
In geopolitical and domestic economic terms, many things are even more difficult at the beginning of the year than in 2023. The minimal growth in Germany will be driven by private consumption, which will receive impetus from the decline in inflation and the strengthening of purchasing power, above all through wage increases in many sectors and the increase in social transfers.
The central banks' interest rate policy could become a bright spot for the economy over the course of the year. The reduction in inflation rates is making progress. This raises the prospect of gradual interest rate cuts. However, Russwurm said that this would not have a noticeable effect on the real economy until spring 2025.
With regard to Germany, the BDI President said that politicians had maneuvered themselves into a complexity trap and were increasing the complexity even further in the struggle for solutions without making any convincing progress. This costs trust and leads to uncertainty among companies and citizens alike.
Economically, this means that there is no reliable basis for calculating investments. Politically, it is driving many people astray out of anger and genuine despair over political events. Russwurm called on all democratic parties to finally come together to make the decisions that the country urgently needs.
"The joint resolutions to speed up approval procedures in 2023 were right and will definitely help. But a one-off effort is not nearly enough," said the BDI President. He cited the strategy for the construction of hydrogen-capable back-up power plants for the energy transition as one of the core issues with a long overdue need for action.
As long as the construction of the envisaged new back-up power plants does not get off the ground because business models and financing are unclear, Germany will remain dependent on the continued operation of coal-fired power plants. The BDI President called it bizarre and embarrassing that Germany, a country with one of the most ambitious decarbonization strategies, would ultimately remain dependent on the continued operation of its coal-fired power plants due to a lack of alternatives. "But this scenario is getting closer by the day," said Russwurm.
The BDI President also addressed the numerous elections in 2024 - European elections, state elections in Brandenburg, Saxony and Thuringia and the US presidential election. "Each of these elections is extremely important to us. That is why we are not indifferent to them," said the Industry President.
German industry wants more Europe, but in the right way, said Russwurm. He sharply criticized the plans for the European Supply Chain Duty of Care Act and the regulatory framework for artificial intelligence (AI Act). "We need a single market that also allows the scaling of future-oriented industrial value creation due to its economies of scale, not only in digitalization, but in general. In addition, we still have a lot of convincing to do as to how industrial competitiveness and climate protection can be brought closer together in European policy. This will require a huge joint effort on the part of European policymakers."
With a view to the state elections in Germany, Russwurm said: "As an industry, we are appealing for prudence and common sense. We want and need an open society and the willingness and ability to engage in political discourse and democratic compromise. This requires more unity among the democrats in our country, not only to finally tackle the fundamental need for action and modernization with determination, but also to protect democracy and freedom."
