Calculations released this week by the Ifo Institute suggest that excluding private households and certain businesses from planned reductions in electricity tax could have a limited, but noticeable, impact on Germany’s economic growth.
According to the Ifo Institute’s analysis, the failure to lower the electricity tax for private households would forfeit approximately 5 billion euros in potential relief. This shortfall is projected to reduce Germany’s gross domestic product (GDP) growth rate by a combined 0.1 percentage points over this year and next.
Beyond the direct financial impact, the Institute highlighted concerns regarding the potential for diminished confidence among consumers and businesses. Recent months have seen a positive shift in sentiment, with reduced uncertainty partly driven by the anticipation of coalition-backed economic measures.
“If these expectations are not met and uncertainty resurfaces, households and businesses are likely to delay their consumption and investment expenditures” stated Timo Wollmershäuser, Head of Forecasting at the Ifo Institute. He warned that such a scenario would further impede the recovery of the German economy.
