OECD: German economy is relatively weak

In its economic forecast, the OECD sees Germany weakening compared to other industrialized countries. Only Great Britain expects even lower economic growth.

A container ship docks at the Eurogate container terminal at Waltershof Port in Hamburg.

According to the Organization for Economic Co-operation and Development (OECD), Germany will grow more slowly than many other major industrial nations this year, despite improving economic prospects.

The OECD raised its forecasts for the German economy on Friday and now expects gross domestic product to increase by 0.3 percent in 2023 and 1.7 percent in 2024. However, only Great Britain is likely to be worse this year, with a minus 0.2 percent expected.

OECD: Global economic recovery still uncertain

For comparison: the eurozone as a whole is expected to grow by 0.8 percent, the United States by 1.5 percent and Japan by 1.4 percent. In November, the OECD was still expecting a 0.3 percent drop in German GDP for 2023 and only a 1.5 percent increase for next year – forecasts shined here.

The recovery of the global economy as a whole remains “fragile”. Isabell Koske, deputy director of the OECD economics division, told Reuters news agency:

For 2024, we expect higher growth in Germany than in other countries.

Isabell Koske, OECD

“The rise can be attributed to the higher order workload in the export business, the revival in investment, as well as the easing of Covid measures in China.” This reduces bottlenecks in supply chains and increases demand for German exports.

Inflation rate in Germany may remain above the EU average

The OECD does not make everything clear on inflation. The inflation rate is expected to be 6.7 percent this year and not fall significantly to 3.1 percent until 2024. “Inflation in Germany will likely remain above the EU average in 2023, due to late delivery of energy and producer prices to end consumers and increased wage pressure,” Koske said.

However, price pressure will gradually ease due to rising interest rates, reduced bottlenecks in supply chains and lower energy wholesale prices. OECD sees energy prices as a risk for the expected economic recovery in Germany.

Koske: Germany must drive digitalization forward

“If financial support measures do not adequately save gas, if weather conditions are unfavorable, or if there are delays in the construction of additional planned LNG infrastructure, gas prices will increase and gas shortages are likely,” Koske said.

Also, a possible increase in demand in China will increase competition for the scarce global supply of liquefied natural gas (LNG). Rising interest rates along with falling real incomes can increase credit defaults and reveal vulnerabilities in the financial system.

The OECD advises politicians to advance the digitization of public administration, streamline planning and approval procedures for infrastructure investments, simplify the tax system and strengthen competition.

In addition, Germany must continue to deal with the economic consequences of aging and the shortage of skilled workers.

Isabell Koske, OECD

Source: ZDF






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