The energy crisis and interest rate hikes by central banks have left the German government cautious this year. In the new annual economic report, which the cabinet approved on Wednesday, the growth forecast was raised to another 0.2%, as confirmed by the Ministry of Economic Affairs in Berlin. In 2022, however, the German economy grew much more strongly at 1.9%. In autumn, the government was even more pessimistic and expected a 0.4% drop for 2023.
Economy Minister Robert Habeck stressed that the economic crisis resulting from the Russian attack on Ukraine is now manageable. “Germany has proved its resilience and has done very well economically.” The initially very pessimistic forecasts – feared a historic drop in the event of a gas shortage – were annulled. “The power supply remains safe and stable.” A clear recession, therefore, is no longer in sight. The task now is to become even more independent in terms of energy supplies. For this, renewable energies would have to be expanded more quickly, according to the green politician. The focus should be on incentives for private investment to channel resources towards climate-friendly technologies. With the reduction of bureaucracy, the planning and approval processes should become faster.
The FDP-led Ministry of Finance announced that the long-term goal was to improve Germany’s productivity and competitiveness. To do this, supply chains would have to be put on a broader basis and the supply of raw materials would have to be secured. For the first time, there is also a separate chapter on taxes and fees in the annual economic report, which is entitled “Renewing Prosperity”. To boost private investments in digitization and climate protection, there will be so-called super write-offs. However, no timeframe was given for this. The Treasury also wants to improve overall cancellation options and give companies more opportunities to offset current losses with past profits. Overall, the burden on companies is very high. Finance Minister and FDP leader Christian Lindner wants to come up with concrete fiscal relief in the spring.
With inflation at its highest level in decades at 7.9% in 2022, the government now expects 6.0% this year. Until now, 7.0 percent was expected. Price-adjusted consumer spending by private households and the state is expected to decline slightly. German exports are expected to grow less strongly this year. An increase of 2.2 percent is assumed here, after 3.2 percent in 2022. The labor market is likely to remain broadly stable. The government estimates the unemployment rate at 5.4% this year, slightly higher than in 2022.