Gesperrte Brücken, Schulen ohne funktionstüchtige Heizungen und andere Mängel der öffentlichen Infrastruktur zeigen, dass Deutschland zu wenig investiert.
Public investment has been badly neglected in Germany over the past two decades, with the result that the public capital stock no longer meets the standards of a modern economy and is inadequate for the challenges that will be posed by demographic change and Germany’s international decarbonisation commitments.
Germany faces enormous challenges in modernizing its capital stock. After neglecting public investment over the last two decades, it is now necessary to update the infrastructure and gradually reduce the investment backlog.
The current account surplus in Germany has grown rapidly especially since the early 2000s and this development has been widely criticised. One of the recommendations of the European Commission and other institutions is to increase public investment as a means to reduce the current account surplus. Indeed, Germany needs a broad investment programme in the field of infrastructure, digitalisation and education, and considering the low interest rate there cannot be better times for it.
Investments are fundamental for entrepreneurial action. The IW-Economist Hubertus Bardt explains in his contribution, how the word market is changing and which investment projects are necessary for the German economy.
German companies’ business operations are increasingly being hampered by infrastructure deficiencies. Following up on their initial 2013 study, the German Economic Institute (IW) used their regular survey on the business cycle to examine how the condition of central infrastructure networks affects companies.
The global economic climate has deteriorated. The protectionist tone of the US administration is provoking a world-wide trade conflict which may well trigger other problems, such as financial crises in China or in Europe.
The German economy remains on an expansion course, with real gross domestic product expected to grow by over 1 ½ percent in 2017 and by 1 ¾ percent in 2018, the lower number of working days acting as a brake on macroeconomic performance in the current year.
2016 has seen an ongoing and dramatic increase in economic and political uncertainty. Besides the growth problems of the larger emerging economies and the as yet unsolved debt and structural problems in Europe, the anticipated exit of the United Kingdom from the EU and the election results in the USA have reduced companies’ long-term planning horizon even further.
IW Economic Forecast Spring 2016
An Empirical Reassessment
Head of the Research Group Macroeconomic Analysis and Forecast
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