MNI INTERVIEW: Germany To Rebound In 2024 - Scope

Germany can expect a “decent recovery” next year, thanks to the often-underestimated resilience of its Mittelstand of smaller companies, Scope Ratings’ senior director of sovereign ratings and lead Germany analyst Eiko Sievert told MNI.

“Germany’s large number of medium-sized companies are highly specialised in some niche markets, which allows the German economy to be quite resilient to some of these global shocks and to reorient if there is a slowdown,” Sievert said in an interview.

But speedier planning procedures for strategic investments and pension reform will be needed in order to avoid a decline in long-term potential growth, he said, adding that Germany needs to consider initiatives such as tax incentives for working beyond retirement age and encouraging the younger population to save.

“I am optimistic that these are challenges they can tackle. The question is whether the politicians will tackle them. If you look over past decade public investment in Germany has lagged that of other triple-A countries.,” he said, though he noted “some progress” in liberalising immigration laws and digitising the public administration.

“If there is a no-change scenario then because the population is likely to fall, and so the working age population declines, we have declining potential growth in Germany, while 0.9% to more like 0.6% doesn’t sound much, it has clear implications for fiscal and economic resilience in the medium term.” (See MNI INTERVIEW: Pricey Energy Means Tough Decade For Germany)