German economy likely to remain in "shock paralysis"
The German economy is unlikely to experience a major recovery in 2024 after the past years of crisis. According to the German Economic Institute, many companies have negative expectations. The outlook is gloomier in the north and east than in the southwest and south.
The German economy is not expecting an upturn in the coming year either. Only 23% of companies have a positive outlook for 2024, while 35% have negative expectations, according to a survey of more than 2,200 companies conducted by the employer-oriented Cologne Institute for Economic Research (IW Köln). The economic survey thus signals "a continuation of the economic shock in Germany", according to the study.
Business expectations have fallen back to the level of autumn 2022, which was characterized by energy price shocks, high inflation and the risk of an energy shortage. "The sharp rise in energy prices in the wake of the Russian invasion of Ukraine, the associated general increase in prices, geopolitical uncertainties and the significant slowdown in the global economy explain the economic standstill in Germany," say the researchers led by IW head of economic research Michael Grömling. This has consequences for jobs and investments.
One in five companies expects to employ more people in the coming year, while 35% expect to employ fewer and 45% want to keep their workforce stable. "This signals that the long period of job creation in Germany has probably come to an end for the time being," it said. Only 27% are planning to increase investment spending compared to the end of the current year, while 36% are planning lower budgets. "The weakness in investment will not be overcome in 2024," concludes the IW.
Many construction companies expect a drop in production
The survey also points to a continuation of the construction and industrial crisis in Germany. 25% of industrial companies expect production to increase in 2024, although 38% anticipate a decline. As many as 54% of construction companies expect a drop in production, with only 13% expecting an increase. In contrast, the business prospects for service providers are almost balanced: 26% expect business to improve, 27% expect it to deteriorate.
The economic outlook has become particularly gloomy in the south-east (Saxony and Thuringia) and north (Schleswig-Holstein, Lower Saxony, Hamburg and Bremen) regions. Here, the balance of optimistic and pessimistic assessments for 2024 amounts to a good minus 20 percentage points, compared to minus 12 percentage points in Germany as a whole.
Companies in the South-West region (Hesse, Rhineland-Palatinate and Saarland) and in Bavaria have balanced economic expectations. "In any case, no noticeably divergent development in eastern and western Germany can be inferred from this expectation picture," according to the IW. "Rather, there are indications of a stronger regional impact of the energy crisis in regions where the primary industry is more strongly represented."
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The Economic outlook for 2024 in Germany, as suggested by the Institute of the German Economy Cologne, is not promising. Their survey reveals that many companies have negative expectations, with only 23% having a positive outlook and 35% expecting a decline, indicating a continuous economic shock.
The gloomier economic outlook in the north and east compared to the southwest and south of Germany is contributing to the "shock paralysis" of the markets and morals, according to the study.
Source: www.ntv.de
