According to a study conducted by the Prognos research institute for the Bavarian Economy (VBW), the German economy is projected to experience extremely modest growth until the middle of the century. This limited growth is contingent upon companies vastly increasing their integration of digital solutions, artificial intelligence (AI), and other technological innovations into their production processes.
The research suggests that because decreasing birth rates mean fewer people are available for the national workforce, and given that manufacturing is already highly mechanized, technological advancement will increasingly become the sole source of economic growth. Without this technical leap, the German economy would contract over the coming decades.
Specifically, the Prognos economists anticipate that overall economic output will increase by only about 0.9 percent per year by 2045. The study elaborates that this projection is not simply an extrapolation of past growth patterns. Instead, it already accounts for the success of the technological shift, as well as the political capacity to partially manage key structural challenges-such as implementing increased incentives (for example, for women and retirees) to slow the decline in the number of active employees.
Furthermore, the Prognos researchers highlight that the entire structure of the German economy is set to transform significantly. In the future, Germany will produce different goods and services, and its population will work in different sectors. The driving forces behind this structural change include digitalization, the essential decarbonization of the economy, demographic and geopolitical shifts, and evolving international division of labor.
Globally, the study indicates a continued shift in economic weight toward emerging economies. By 2045, these developing nations are projected to account for roughly half of the global gross domestic product. Asian countries like India and Indonesia, alongside certain African nations, are benefiting from younger populations, increasing penetration of rural areas, and rising infrastructure investment.
China remains a significant engine for growth. Although dynamics are slowing down due to aging and structural adjustments, the research predicts that the People’s Republic will surpass the European Union in terms of real GDP within this decade. Meanwhile, the United States is expected to maintain its economic preeminence relative to its Eastern rivals. Ultimately, the researchers forecast a long-term era of economic bipolarity between the US and China, with the European Union occupying a third pole that lacks the dominance of these two major powers.
