13.03.2025 • 10/2025
A turning point for the German economy?
The international political environment has fundamentally changed with looming trade wars and a deteriorating security situation in Europe. The leading parties in Germany are setting the stage for debt-financed additional defence tasks with far-reaching changes to the debt brake. This entails major risks for the German economy, but also opportunities. Meanwhile, the economy continues to be in a downturn. According to the spring forecast of the Halle Institute for Economic Research (IWH), gross domestic product (GDP) in 2025 is likely to be roughly the same as in the previous year, and it will not increase significantly until 2026, partly because uncertainty about German economic policy is likely to decrease after the new government is established, meaning that the savings rate of private households will fall again somewhat and the debt-financed additional government spending will gradually have an impact on demand. The IWH economists are forecasting an increase in GDP of 0.1% for 2025. In December, they were still forecasting growth of 0.4% for 2025. The outlook is similar for East Germany, where production is likely to have increased slightly in 2024, unlike in Germany as a whole.
Oliver Holtemöller
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16.01.2025 • 3/2025
Medium-term projection for the German economy and scenarios for achieving the targets of the Climate Protection Law
The potential growth rate of the German economy is declining. According to the medium-term projection of the Halle Institute for Economic Research (IWH), potential output is likely to increase by an annual average of just 0.3% in the medium term (2023-2029). The target of climate neutrality by 2045 is likely to be missed by a wide margin without further emission-reducing measures. It could be achieved by means of higher CO₂ prices at significantly lower macroeconomic costs than by means of non-market-based regulatory measures.
Oliver Holtemöller
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08.01.2025 • 1/2025
IWH founds a European centre for microdata research
The Halle Institute for Economic Research (IWH) is once again growing significantly. A new institute unit will generate access to microdata from European countries to facilitate new research on productivity, a prerequisite for prosperity. The IWH's budget increases by almost one million euros per year.
Reint E. Gropp
Javier Miranda
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Reassessing EU Comparative Advantage: The Role of Technology
Filippo di Mauro, Marco Matani, Gianmarco Ottaviano
Abstract
Based on the sufficient statistics approach developed by Huang and Ottaviano (2024), we show how the state of technology of European industries relative to the rest of the world can be empirically assessed in a way that is simple in terms of computation, parsimonious in terms of data requirements, but still comprehensive in terms of information. The lack of systematic cross-industry correlation between export specialization and technological advantage suggests that standard measures of revealed comparative advantage only imperfectly capture a country’s technological prowess due to the concurrent influences of factor prices, market size, markups, firm selection and market share reallocation.
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Reassessing EU Comparative Advantage: The Role of Technology
Filippo di Mauro, Marco Matani, Gianmarco Ottaviano
Abstract
Based on the sufficient statistics approach developed by Huang and Ottaviano (2024), we show how the state of technology of European industries relative to the rest of the world can be empirically assessed in a way that is simple in terms of computation, parsimonious in terms of data requirements, but still comprehensive in terms of information. The lack of systematic cross-industry correlation between export specialization and technological advantage suggests that standard measures of revealed comparative advantage only imperfectly capture a country’s technological prowess due to the concurrent influences of factor prices, market size, markups, firm selection and market share reallocation.
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12.12.2024 • 31/2024
Frosty prospects for the German economy
The German economy will continue to stagnate in winter 2024/2025. Industry is suffering from a loss of international competitiveness. For this reason and due to the unclear economic policy outlook, firms and consumers are holding back on spending, although incomes have increased recently. Consumer spending will only increase more strongly once the uncertainty subsides. According to the winter forecast of the Halle Institute for Economic Research (IWH), gross domestic product in Germany is expected to fall by 0.2% in 2024 and to expand by 0.4% in 2025. In September, the IWH forecast had still assumed a zero growth in 2024 and a growth of 1.0% in 2025. In East Germany, gross domestic product will increase by 0.5% both this year and in 2025.
Oliver Holtemöller
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Mittelfristige Projektion der gesamtwirtschaftlichen Entwicklung und Szenarien für die Erreichung der gesetzlichen Emissionsziele
Andrej Drygalla, Katja Heinisch, Oliver Holtemöller, Axel Lindner, Alessandro Sardone, Christoph Schult, Götz Zeddies
Konjunktur aktuell,
No. 4,
2024
Abstract
Das Produktionspotenzial der deutschen Wirtschaft wächst mittelfristig (2023 bis 2029) mit einer jahresdurchschnittlichen Rate von 0,3% und damit deutlich schwächer als in den Jahren zuvor. Dies ist auf eine ungünstigere Entwicklung aller drei Faktoren (Arbeitsvolumen, Kapitalstock, totale Faktorproduktivität) zurückzuführen. Das potenzielle Wachstum wird insbesondere durch den Rückgang der durchschnittlichen Arbeitszeit gedämpft.
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05.09.2024 • 24/2024
Moderate economic growth in the world – German economy continues to stagnate
Production in Germany has been stagnating for two years and is roughly the same level as shortly before the outbreak of the pandemic. Investment of firms is particularly weak. An important reason for fewer investments is the sluggish export business. Private households are also holding back on consumption, mainly due to concerns about the longer-term economic outlook. According to the autumn forecast of the Halle Institute for Economic Research (IWH), gross domestic product in Germany is likely to stagnate in 2024 and to increase by 1.0% in 2025 as capacity utilisation normalises. In June, the IWH forecast had still assumed a growth of 0.3% in 2024 and of 1.5% in 2025. In East Germany, gross domestic product will increase by 0.3% this year and by 0.9% in 2025.
Oliver Holtemöller
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13.06.2024 • 17/2024
German economy still on the defensive – but first signs of an end to the downturn
In the first half of 2024, signs of an economic recovery are increasing. Production, however, is likely to expand only modestly during summer. From the autumn, the recovery is likely to pick up speed with higher real incomes and a modest increase in exports. In its summer forecast, the Halle Institute for Economic Research (IWH) expects gross domestic product to expand by 0.3% in 2024 and by 1.5% in 2025 (East Germany: 0.6% and 1.4%). In March, the IWH forecast had assumed a growth of 0.2% in 2024 and of 1.5% in 2025.
Oliver Holtemöller
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27.03.2024 • 10/2024
Joint Economic Forecast 1/2024: Headwinds from Germany and abroad: institutes revise forecast significantly downwards
According to Germany’s five leading economic research institutes, the country’s economy shows cyclical and structural weaknesses. In their spring report, they revised their GDP forecast for the current year significantly downward to 0.1%. In the recent fall report, the figure was still 1.3%. Expectations for the coming year are almost unchanged at 1.4% (previously 1.5%). However, the level of economic activity will then be over 30 billion euros lower due to the current weak phase.
Oliver Holtemöller
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