Company outlook for 2024
The German economy will probably remain in a state of “shock”
December 4, 2023, 4:32 p.m
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The major liberation of the German economy after the past years of crisis is unlikely to occur in 2024. According to the German Economic Institute, many companies have negative expectations. In the north and east the view is cloudier than in the southwest and south.
The German economy is not expecting an upswing in the coming year either. Only 23 percent of companies have a positive outlook for 2024, while 35 percent have negative expectations, according to a survey of more than 2,200 companies by the employer-related Institute of the German Economy (IW Cologne). The economic survey signals “a continuation of the economic paralysis in Germany,” it is said in the study.
Business expectations have fallen back to the level of autumn 2022, which was characterized by energy price shocks, high inflation and the risk of an energy shortage. “The sharp increase in energy prices in the wake of the Russian invasion of Ukraine, the associated general increase in prices, the geopolitical uncertainties and the significant decline in the dynamics of the global economy explain the economic standstill in this country,” said researchers led by IW economics chief Michael Grömling. This has consequences for jobs and investments.
One in five companies expects to have more employees in the coming year, 35 percent expect fewer, while 45 percent want to keep their workforce stable. “This signals that the long-term increase in employment in Germany may have come to an end for the time being,” it said. Only 27 percent are planning higher capital expenditure than in the year ending, while 36 percent are planning lower budgets. “The investment weakness will not be overcome in 2024,” is the conclusion of the IW.
Many construction companies expect production losses
The survey also points to a continuation of the construction and industrial crisis in Germany. 25 percent of industrial companies expect higher production in 2024, although 38 percent expect a decline. Among construction companies, 54 percent are expecting a decrease in production, while only 13 percent expect an increase. The service providers’ business prospects, on the other hand, are almost balanced: 26 percent expect better business, 27 percent expect worse business.
The economic outlook has become particularly cloudy in the south-east (Saxony and Thuringia) and northern (Schleswig-Holstein, Lower Saxony, Hamburg and Bremen) regions. Here the balance of optimistic and pessimistic assessments for 2024 amounts to a good minus 20 percentage points, while in Germany as a whole it is minus 12.
Companies in the South-West region (Hesse, Rhineland-Palatinate and Saarland) and in Bavaria have balanced economic expectations. “In any case, no noticeably different development in East and West Germany can be concluded from this expected picture,” says the IW. “There are more indications of a regionally stronger impact of the energy crisis in regions where the primary industry is more strongly represented.”