Germany’s independent panel of economic advisors has revised upward its growth forecast for the current year, signaling a tentative return to expansion after a period of stagnation. The Council of Economic Experts (Sachverständigenrat) now anticipates a modest 0.2% real GDP growth for 2024 compared to the previous year, a significant shift from prior expectations of no growth. This marks the first instance of positive growth since 2022.
However, this cautiously optimistic outlook is tempered by a downward revision of the forecast for 2026, now projecting a 0.9% real GDP growth, down from a previous estimate of 1.0%. The council attributes the near-term growth to a combination of increased government spending and the calendar-driven effect of a higher number of working days.
Monika Schnitzer, chair of the Council, underscored the urgent need for Germany to redefine its growth and security strategies. “Given the current challenges, Germany must develop new perspectives on growth and security” she stated, emphasizing the importance of maximizing opportunities arising from the special fund for infrastructure and climate neutrality.
The Council’s report delivered a pointed criticism of the implementation of the aforementioned special fund (SVIK), arguing that the current spending plans are failing to deliver the anticipated impact on GDP. They contend that a significant portion of the funds is being diverted to internal budget reallocations and consumption-driven expenditures, rather than channeled into genuinely new investments. This misdirection is significantly diminishing the fund’s potential for stimulating economic activity.
While acknowledging that the recently approved cut in corporate taxes is expected to moderately boost investment and GDP growth, the Council stressed that a more neutral tax structure could yield considerably greater positive effects. They advocated for policies that actively encourage private wealth accumulation, particularly for retirement planning. Furthermore, the report urged a more equitable taxation of inheritances and gifts to align the tax system more closely with the principle of ability to pay, a long-standing debate surrounding fairness and economic opportunity within the German system. The underlying message suggests a structural reform agenda is required to secure more robust and sustainable growth prospects for the German economy.