GDP forecast 2023: Federal government expects little growth


Berlin So far, the process for the annual economic report has been tried and tested: the federal government always makes its economic policy creed in January. It was almost entirely about the basics. But the Ukraine war and the energy crisis have ensured that the Federal Minister of Economics Robert Habeck presented a different-style report on Wednesday.

Only after seven minutes did he get to the topic for which he actually became Minister: the transformation of Germany into a socio-ecological market economy.

The reasonably good news on this day: You can look ahead again. In the annual economic report for 2023, the federal government no longer expects a recession, gross domestic product (GDP) is expected to grow by 0.2 percent, as reported by the Handelsblatt newspaper last week.

“We are now assuming that the recession will be shorter and milder, if it takes place at all,” said Habeck. But there is still no talk of a good situation from which the German economy can start moving towards transformation with full force.

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The focus of the report is primarily on the “supply policy agenda” – jargon that is actually only known from the Ministry of Finance. And that agenda is less fundamental than the term suggests. Habeck’s officials already wrote about that agenda in the draft for the current report from mid-December. Habeck himself spoke of a “transformative supply policy” on Wednesday.

On the one hand, the formulation is likely to be related to small-small power politics, because Minister of Finance Christian Lindner (FDP) repeatedly accuses Habeck of paying too little attention to the economic framework and of propagating too much of a demand policy.

Neither of them will deny that Habeck is more open to subsidies than Lindner. However, the annual economic report shows that the federal government wants to focus primarily on the framework conditions: get out of crisis mode and make transformation possible. It’s not just about the current energy crisis, it said unanimously on Wednesday from the Federal Ministry of Finance.

Investments are increasing again

Because the conditions for the transformation have not really relaxed despite the possible absence of a recession. Investments are a decisive factor: are companies investing in new, energy-saving, climate-friendly machines, vehicles and factories? The energy price shock has meant that many companies lack the funds to implement these investments.

When the report was presented, Habeck’s new chief economist, Elga Bartsch, explained that investments were slowly beginning to show an upward trend. The federal government expects investment in equipment to grow by 3.3 percent in 2023. In 2022 it was 2.5 percent. However, the annual economic report still speaks of a continued “subdued development”. Before the outbreak of war, the forecasts for investments sometimes indicated growth in the double-digit percentage range. Even now, the federal government is still hoping for significantly more investment momentum after 2023.

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“Of course there has been a reluctance to invest in the past few months,” said Habeck. In order to “unlock” them again, the state must ensure trust in stability and that investments pay off. His people put it on paper in the supply policy agenda: more renewable energies for lower electricity prices, recruitment of skilled workers. In addition to these medium-term measures, there are also measures that are intended to have a halfway short-term effect.

>> Also read here: The federal government assumes export risks for medium-sized companies

The SPD, Greens and FDP had already anchored in the coalition agreement the introduction of “super write-offs” for investments in climate protection and digitization. However, the implementation is complex and is still a long time coming.

Simplified loss carryback could be extended

But there are alternatives. During the corona pandemic, the federal government introduced the option of “degressive depreciation”. With the degressive method, the annual depreciation amount is significantly higher at the beginning than with the usual straight-line depreciation. In this way, companies can deduct more from their taxes earlier and the investment pays off more quickly. So far, degressive depreciation was only permitted up to the end of last year.

>> Also read here: The six biggest injustices for taxpayers in Germany

But even in the first draft of Habeck’s annual economic report, there was a suggestion to extend the degressive depreciation as a “bridging solution”.

It is also about loss offsetting, which allows companies to offset profits against earlier or later losses in order to reduce the tax burden. As with depreciation, the federal government had expanded this option as a result of the corona pandemic. The annual economic report now contains a proposal to extend the simplification for this so-called loss carryback again.

This measure is also not one that one would originally suspect from Habeck. But the Vice Chancellor made it clear on Wednesday what role supply-side policy must now play: “State subsidies are always the last resort.”

More: Sandra Detzer is the new economic policy spokeswoman for the Greens



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