Revises the projected GDP growth figure downward, according to Habeck.
Unsatisfying: The Federal Administration Predicts a Drop in Economic Efficiency in 2024. Minister of Economics Robert HabeckViews the Growth Plan as Inadequate. The Federal Administration is More Positive for the Following Year.
The Federal Administration anticipates a 0.2% diminution in economic efficiency this year, significantly modifying its forecast for the domestic product growth trajectory. As Minister of Economics Robert Habeck disclosed in Berlin, the Federal Administration had earlier projected a slight boost of 0.3% in the domestic product.
The alteration does not come as a surprise, since prominent economic research institutions also recently revised their assumptions downward, predicting a decline of 0.1%. The major cause is business and citizen uncertainty. High interest rates are hindering investments, companies are cautious due to the unpredictable economic and geopolitical context, and private households are opting for savings over property or consumption investments.
For the forthcoming year, the Federal Administration is more hopeful than earlier: it projects a rise of 1.1%. "Germany is a nation abundant in capabilities and strength," said Habeck in Berlin. Although the current economic circumstances are not pleasing, "we will shed them and navigate our way out of them," emphasized the Green politician. Germany features a robust medium-sized manufacturing industry with global market leaders, a well-established social partnership, exceptionally skilled workers, and a dynamic startup scene.
The Federal Administration is banking on a revival in private consumption next year and an increase in the export of industrial goods. German companies could then afford to invest more. Additionally, the Federal Administration is relying on its growth package with tax reductions, job incentives, and electricity price reductions. According to Habeck, "if implemented fully, and that implies completely, the economy will gain strength, and more individuals will regain employment again." "Consequently, the measures of the growth initiative must now be uniformly implemented by everyone," emphasized Habeck. The federal states should also contribute. There are fears within the Federal Administration that the states will block several measures in the Bundesrat due to the loss of less tax revenue.
Eminent economic research institutions have recently expressed reservations about whether the package can provide the necessary impetus. Many measures have yet to be carried out. Habeck also concedes that more is needed to put Germany back on the growth path. Similarly, Finance Minister Christian Lindner recently expressed himself. Presently, Habeck is proposing additional measures: a substantial reduction in network fees and bureaucratic reduction, such as in data protection. "What matters in practice is what provides relief," said Habeck.
Habeck Calls for Flexibility in Debt Ceiling
The Federal Administration's economic forecast also serves as a foundation for the upcoming tax estimate adjustments. Lower tax revenues than previously predicted, coupled with higher social insurance expenses, could strain the budget negotiations of the traffic light coalition. Meanwhile, lower development prospects mean that a higher debt increase is likely due to the debt ceiling mechanism.
According to Habeck, a reform of the debt ceiling could aid the German economy in overcoming the crisis. The most effective and swift method for promoting growth is investment incentives, asserted the Green politician in Berlin. However, the debt ceiling in the state constitutions and the federal budget constrains this opportunity. "If there were more leeway here, we would truly extricate the economy from its predicament," Habeck predicted.
Finance Minister Christian Lindner, however, countered, "Growth cannot be purchased through debt by the state." Germany does not have a cyclical problem that the state could mitigate through demand, but a structural problem. Small and medium-sized businesses, crafts, and industry have lost faith in the location.
Given the challenging economic outlook as the Federal Administration predicts a drop in economic efficiency this year, Minister Habeck has viewed the growth plan as inadequate. Furthermore, in light of these economic challenges, Habeck has called for flexibility in the debt ceiling, believing that it could aid in the German economy's recovery.
