“The ifo business climate is stagnating at a low level, yet the outlook for the German economy is better than the gloomy mood. Noticeably rising wages, more or less stable employment and the declining inflation rate should give new impetus to consumption in the foreseeable future. In addition, global monetary easing could begin in the course of 2024, from which Germany, as a producer of capital goods, can benefit. A significant part of the current burdens is cyclical in nature, but overcoming structural challenges such as demographic ageing and the energy transition still calls for the highest priority.”
Previous comments from Dr Fritzi Köhler-Geib
Russia’s war of aggression against Ukraine and the COVID-19 pandemic have shaken the foundations of a rules-based world order and the German economic model. Even amid the necessary short-term crisis management, investments are key to successful adaptation to the changed environment. They make restructuring energy supplies and the green and digital transformation possible – and demand a joint effort by government, the business community and private households. The lion’s share of necessary investment will have to come from the private sector. The current burdens from high energy costs and uncertainties act as additional roadblocks. So it is all the more important to encourage and provide intelligent support for private investment. Government therefore has a key role to play: first, by formulating targets and setting frameworks and incentives and second, by investing in infrastructure and human capital, both of which are required for the productive realisation of private-sector activity.
A boost in investment for the transformation – what exactly is needed?
Further position papers and publications on the coronavirus and the crisis
Rebuilding the economy after COVID-19 and tackling the climate crisis must go hand in hand. For Germany to achieve its target for climate action, it needs to tap into overlooked areas of potential to reduce its CO₂ emissions. In particular, this process will be essential for the transport sector. And there is even more that can be done with innovative building solutions.
KfW Research, KfW Group, Palmengartenstrasse 5-9, 60325 Frankfurt, Germany,
