MNI BRIEF: German Growth Stuck At 0.3% For Years To Come - IWH
MNI (LONDON) - Decreased labour volume, capital stock and total factor productivity mean Germany’s potential annual growth rate has weakened “significantly” to an average of just 0.3% from 2023-2029, the Halle Institute for Economic Research (IWH) reported on Thursday.
The German government is expected to run an average annual budget deficit of around 2% between 2025 and 2029, Monetary transfers and social benefits in kind are seen growing at a faster rate than GDP, requiring higher social security rates. Germany’s structural budget deficit is expected to be above the EU threshold of 1.5% in the medium term.
Berlin will also miss the legally-required target of reaching climate neutrality by 2045, with carbon dioxide emissions falling only slightly if no further measures are taken to reduce them. However it could be achieved by means of higher CO2 prices at significantly lower macroeconomic costs than by means of non-market-based regulatory measures, a statement said.