According to an assessment by the KfW Group, Germany has realistic prospects for significantly increased and lasting growth, even after years of stagnation. A study by KfW Research indicates that an annual potential growth rate exceeding one percent is attainable over the coming decade. This projection comes after years where growth, which hovered near two percent in 2015, has fallen to just slightly above zero.
The study posits that for a sustainable turnaround to occur, Germany must strategically strengthen its three central drivers of growth: labor, capital, and productivity. The most critical factor identified is the establishment of a new dynamic in productivity growth, a conclusion drawn from a comprehensive twelve-point policy paper.
This document outlines specific actions required, noting that artificial intelligence and digitalization must be implemented faster and more widely across companies. Furthermore, digital innovation projects need to be easier to finance, and new technologies must be scaled up more rapidly within both small and medium-sized enterprises and large industry. Stefan Wintels, the CEO of KfW, emphasized that Germany does not require an “economic miracle,” but rather a “convincing strategy” for sustained growth.
The twelve-point paper synthesizes the analysis, naming the key levers needed to transition Germany from structural growth weakness to positive economic dynamism. According to KfW, this growth hinges on the interaction of several dimensions, including providing better conditions for investment, ensuring a competitive energy supply, securing skilled and qualified labor, fostering an environment that supports innovation, and strengthening the integration of the German economy into Europe and the global market.
Dirk Schumacher, KfW’s Chief Economist, advocated for smarter and more effective regulation, along with a reduction in bureaucracy. He stressed that any new rule should be fundamentally scrutinized to determine if it achieves its purpose, what its subsequent costs are, and whether it unnecessarily hinders entrepreneurial initiative. Schumacher argued that a lean public administration is not a secondary concern, but a crucial factor for the country’s overall competitiveness. He concluded that targeted reform efforts are essential for reviving growth sustainably and regaining technological leadership.
