DC MaF 1 - Macroeconomic Forecast 2023 - Germany

The German economy stagnated in the second quarter of 2023, following a decrease in real GDP of 0.1% in the first quarter. For both quarters, growth was significantly weaker than previously expected. Real wage losses continued to weigh on private consumption during the first half of 2023. Additionally, weak dynamics in external demand led to subdued exports. Public consumption declined in the first quarter, reflecting the progressive phasing out of COVID-19- related spending.

Since January 2023, confidence indicators for manufacturing have been on a downward trend. This was particularly pronounced in the energy-intensive industries. There, the energy price shock following Russia’s war of aggression against Ukraine hit particularly hard. Even after this shock subsided, energy price levels remained elevated in comparison to production locations elsewhere, especially outside of Europe, which negatively impacts competitiveness. More recently, in May, indicators for the services sector also started to decline, reflecting a weakness in manufacturing-related services as well as in transport and logistics. Despite the negative sentiment, a turnaround to positive real wage growth is expected to lead to a subdued recovery in the third and fourth quarters, driven by private consumption.

On an annual basis, the economy is now projected to shrink by 0.4% in 2023. This is a downward revision compared to the 0.2% growth projected in the Spring Forecast. A weak overall outturn for consumption and a decline in construction investment are forecast to negatively impact growth, despite support from an uptick in equipment investment. While weak external demand depresses exports, net exports are expected to contribute positively to growth due to falling imports.

( EU Commission – LUD 11.09.23 )

Russia’s war of aggression against Ukraine disrupted a strong recovery from the COVID-19 pandemic. A spike in energy prices has fuelled inflation and reduced the purchasing power of households. High uncertainty, particularly related to energy security, weighs on investment.

The government has acted swiftly to secure energy supply and support households and firms. 

The economy will slowly recover due to easing supply-chain bottlenecks, a large order backlog and a pickup in export demand.

Accelerating the green transition will help to strengthen energy security but requires more investment, innovation and business dynamism, which will also support productivity and potential growth.

Rapid population ageing will exacerbate labour shortages, lowering potential growth and raising fiscal pressures

A large infrastructure backlog and investment needs for the green and digital transition require raising spending efficiency, better prioritising spending and reducing tax expenditures. Digitalising the public sector is key to reduce the administrative burden, raise the quality of public spending through better policy targeting and evaluation, and improve tax enforcement.

Labour taxes are among the highest across OECD countries, hampering labour supply, particularly of second earners and low-skilled workers. 

Effective inheritance and gift tax rates are low, particularly for wealthy households, while wealth inequality is high. 

Cutting tax exemptions for real estate and VAT and raising property taxes would reduce distortions, increase fairness and raise revenue. 

Strengthening tax enforcement is key for levelling the playing field and raising revenue.

Some progress has been made in the fight against money laundering and corruption.

The digitalisation of the public administration holds large potential to raise spending efficiency, growth and welfare.

( OECD Economic Survey – Germany 2023 )

After reading the articles above seems that economy is still on covering stage and not so bad. But there are some statistical figures such comparing the bad with the worst.., Instead, the figures has to be manipulated according to the reel needs- demand and reel potential.., unfortunately the situation on real world is not the same, high inflation – over 100 % on some products but not shown on statistically. 

Income sharing is unequal. Resources are shared by some powerful individual groups – companies. Wages are low, Most people are poorer than before. 

Hereby, the real potential of humanity – the talents – skills – abilities of the people are not on the screen. There is only a work market bullshit; the governments or companies are asking for the human flesh educated the areas they regulate and exploiting them.

There is always a better way of expressing the real potential of humanity costing more than money..!

21.10.2023 BC DC Düsseldorf