Leading German economic research institutes are cautioning policymakers against misinterpreting the newly released growth forecasts for the upcoming year. Experts emphasize that the projected increase in economic activity is largely stimulus-driven and not indicative of fundamental strengthening.
Speaking to the dts news agency, Stefan Kooths of the IfW stated that the projected growth is not a self-sustaining upswing, but rather heavily propelled by substantial public borrowing. He drew an analogy to a person temporarily relieved by a quick-fix solution, warning against assuming genuine recovery or a path to sustained health. He cautioned that current economic policy should not feel validated by these figures.
The forecast indicates a deceleration of growth to a mere 0.2% by the end of the decade, contingent on the absence of structural reforms designed to enhance long-term competitiveness. This limited growth rate underscores the need for policy adjustments to achieve truly improved economic performance.
Despite these concerns, the economists expressed optimism regarding potential positive impacts from trade agreements. Expanding access to other global economic regions is seen as crucial, with particular emphasis placed on Mercosur, where progress appears to be emerging. The European Union’s agreement with Indonesia was also highlighted as a positive development, marking a departure from the previous practice of linking trade agreements with extensive standardization requirements.
The certainty surrounding the projected 1.3% growth for the German economy next year remains uncertain. Responding to inquiries about whether the expanded debt rules guarantee growth, Geraldine Dany-Knedlik of the DIW stressed that the figure is a forecast, not a guarantee. The assessment provided by the institute reflects expert opinion on the potential course of the German economy, acknowledging a significant degree of uncertainty regarding the effects of fiscal stimulus and capital outflows.
