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Gloomy forecasts in Germany for 2023

2022-09-11 18:27:27Biznes SHKRUAR NGA ANILA SHUKA
Gloomy forecasts in Germany for 2023
Gloomy forecasts in Germany

Researchers predict for 2023 GDP contraction and up to 9.7 percent inflation.

On October 1, the minimum wage in Germany will increase to 12 euros/hour. Experts say that this will further increase inflation. According to the Institute for Economic Research in Munich (ifo), the further increase in the minimum wage in Germany on October 1 is likely to "increase inflation further". Almost a third of the 6,900 companies surveyed by ifo have stated that they pay part of their staff at 12 euros per hour. 58 percent of these companies "are planning to raise prices in response to rising wages," the Institute reported on Friday, September 9, 2022. The minimum wage in Germany rose in July from 9.82 to 10.45 euros an hour and will rise by law to 12 euros on October 1. More than six million employees will benefit from this.

Half of the affected companies expect less profit, a quarter expects a drop in demand for their products. To compensate, 18 percent are considering reducing employees' working hours or reducing overtime pay. Only 13 percent of affected companies plan to cut jobs, said ifo expert Sebastian Link.

Differences between branches of the economy

According to ifo, there are large differences depending on the region and industry. While in West Germany there are 29 percent of surveyed companies that pay their workers less than 12 euros per hour, in East Germany there are 40 percent. On average throughout Germany, 6 percent of employees are paid less than 12 euros/hour.

The most affected companies are in the hospitality industry (78 percent), the temporary employment sector (64 percent), the retail trade branch (58 percent), the textile industry (72 percent) and the food and beverage industry (61 percent). In the metal and chemical industries, the minimum wage does not play a role. The construction industry pays a minimum wage of €12.85 per hour.

The state cannot compensate for inflation

The German Ministry of Finance (BMF) raises doubts about the usefulness and effectiveness of the three rescue packages that the federal government has launched to fight high energy prices. "Full compensation for reduced real state income is neither affordable nor makes sense from an economic point of view," says a BMF paper in preparation for the meeting of finance ministers from the eurozone and the EU, which is taking place this year. weekend.

From Germany's point of view, until now, the federal government has only partially fulfilled the goals it set for itself with the three relief packages, which in total reach the figure of nearly one hundred billion euros. The packages contain many measures, such as financial assistance for people in need, compensation for the increase in the price of energy with a salary supplement of 300 euros gross in the month of September for each employee, and a supplement of 100 euros for each child.

Relief packages raise prices

The document in question also expressly warns that easing measures may further increase prices. "Special care must be taken not to further increase the inflationary pressure through fiscal policies", write the experts of the Federal Ministry of Finance.

Experts have also expressed concern that debt-financed relief packages could weigh on EU member states' budgets. "Stable public finances remain essential, especially in circumstances of rising interest rates," they write. The economic situation in the eurozone is "characterized by a high degree of uncertainty". Above all, there is the risk of an even higher inflation in the eurozone, but also of a further weakening of the economic situation.

Record inflation 2023

These concerns were previously expressed by two other institutes. The Institute for Economic Research based in Kiel, IfW, in an analysis published on Thursday, 8.09.2022, has predicted for the next year an inflation of 8.7 percent. Currently, inflation in Germany is at a record level of 8 percent. While the Institute for Economic Research in Halle (IWH), in its autumn forecast, published on Thursday, calculates with an inflation of 9.5 percent.

Gloomy forecasts in Germany for 2023
Citizens in Germany have started protests against price increases

Both institutes calculate with a strong decline in Gross Domestic Product (GDP). "The German economy is going downhill, says the IfW report. The increase in the price of gas and electricity will significantly reduce purchasing power. According to the IFW, Germany will have a GDP decline of 0.7 percent in 2023, while IWH calculates a GDP decline of 1.4 percent.

The weakening of the conjuncture all over the world has as an effect not only the decline of exports, but also the decline of investments. "As a result, the German economy will again fall into a recession, precisely at a time when it was just beginning to recover from the shocks of the pandemic," - writes the IfW from Kiel.

Unemployment growth not very high

Amidst all these gloomy predictions, there is a glimmer of hope: There will be no big increase in unemployment. The reason for this is the lack of qualified workforce. IfW economists predict an increase in unemployment from 5.3 percent (today) to 5.6 percent.

And public revenues will not decrease either: According to experts, although the state gives a lot of money to alleviate the burden of the increase in energy prices, the state's income from taxes and duties is not expected to decrease, due to high prices. Even the level of gross debt in relation to Gross Domestic Product (GDP) is expected to drop by 2024 to 64.6 percent. In 2021, it was 68.7 percent, predict the economists from Kiel./ DW


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