German businesses are reducing their investment plans and halting hiring as they lack confidence in the country’s economic recovery, according to a survey conducted by the Association of German Chambers of Industry and Commerce (DIHK). The survey, which involved over 24,000 companies, revealed that more than half of the respondents view Germany’s economic policy as a business risk. Concerns are also growing within the industry.
Martin Wansleben, Managing Director of DIHK, expressed his concerns, stating, “We see no sign of a self-sustaining upswing so far. On the contrary, companies have revised their investment plans, which are important for this, and their hiring intentions downward – both into negative territory.” Only 13% of the companies surveyed expect an improvement in the next year, while 35% anticipate a deteriorating economic situation and predict a continued decline throughout the following year.
The survey highlighted several challenges facing German businesses, including the rising prices of energy and raw materials. Additionally, a lack of qualified workers and weak domestic demand were identified as major obstacles for companies in the future.
The German economy has struggled to grow for over a year, with economists attributing this stagnation to a combination of factors, including the energy crisis, sluggish Chinese demand, and soaring interest rates. Accordingly, researchers at DIHK have downgraded their previous forecast of zero growth for Germany this year to a projected contraction of 0.5%. Their outlook for 2024 is no growth, aligning with a recent report by S&P Global, which revealed a sharper decline in private-sector activity this month compared to September.
Despite the government’s more optimistic estimates, the DIHK’s forecast suggests a continued downward trend for the German economy. These findings reflect a broader sense of uncertainty among businesses, as they navigate through challenging economic conditions and cope with factors such as energy prices, raw material costs, and a shortage of skilled workers.
It is evident that German companies, which form the backbone of the country’s economy, are bracing for a prolonged economic slowdown. The lack of confidence and investment plans being scaled back indicate a cautious approach to future growth. While external factors such as the energy crisis and global demand patterns play a significant role in Germany’s economic challenges, the survey underscores the need for robust policies that can revive domestic demand and create a favorable environment for businesses to thrive.
As the German economy continues to face headwinds, it is vital for policymakers to address the concerns raised by the business community. Effective measures to reduce energy costs, support the development of a skilled workforce, and stimulate domestic demand can potentially provide the necessary impetus for a sustainable economic recovery. Without concrete action, Germany risks further deterioration and a prolonged period of economic stagnation.