Gesperrte Brücken, Schulen ohne funktionstüchtige Heizungen und andere Mängel der öffentlichen Infrastruktur zeigen, dass Deutschland zu wenig investiert.
Unlike public sector consumption, public investment is often regarded as contributing to growth. Yet while spending on "intangible" goods such as education does not count as investment, even though it is potentially growth-enhancing, expenditure with little to no effect on growth often does.
The study will first outline the way in which Germany’s fiscal policy was driven for several decades by a paradigm that centered on deficit control and reduced state involvement in the economy.
Only four weeks before the planned date in June 2012, the opening of Berlin's major airport BER, which had already been postponed from autumn 2011, was cancelled. This was followed by years of announcements, ever new lists of construction deficiencies and further delays.
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.
Head of the Research Group Macroeconomic Analysis and Forecast
Tel+49 221 4981-776
Mailgroemling@iwkoeln.de
