Survey: Weak economic recovery in Germany, sustained low business confidence

Berlin, November 6 (Xinhua) -- Despite multiple reform measures introduced by the new federal government, the German economy has yet to show signs of recovery, according to an economic survey released by the German Chamber of Commerce (DIHK) on the 6th. Business confidence has not improved in the past few months.

The survey covers approximately 23000 companies from various industries and regions, evaluating their current operating conditions and future expectations. The association predicts that the German economy will stagnate this year and only achieve a weak growth of 0.7% next year. This expectation is significantly lower than most economists' predictions.

The German economy has been in recession for two consecutive years in 2024. Most experts believe that the German economy will experience slight growth by 2025, and the growth rate is expected to exceed 1% by 2026.

When German Chancellor Merkel took office in May, he hoped for a rapid rebound in economic confidence. DIHK CEO Helena Melnikov pointed out that the economic situation in Germany did not improve throughout the summer, but rather slightly deteriorated. The DIHK Economic Prosperity Index fell by 1 point to 93.8 points, still in a clearly pessimistic range.

The survey shows that the investment willingness of enterprises is still sluggish. Only 15% of the surveyed companies expect the economic situation to improve in the next 12 months, while a quarter of the companies expect the situation to worsen. Melnikov attributed this situation to poor export prospects and the cautious attitude of enterprises in investment. Among the interviewed companies, only one-fifth plan to increase investment, while one-third plan to reduce investment.

The labor market situation is equally severe. Only one tenth of the surveyed companies plan to increase their workforce, while a quarter plan to lay off employees. The development of enterprises is still mainly constrained by structural problems: 56% of enterprises believe that labor costs are one of their biggest operational risks. Melnikov stated that the continuously rising social insurance contributions and the recent minimum wage increase have had a significant impact, especially in labor-intensive industries such as catering.

Melnikov called on the government to accelerate the process of reducing burdens and help businesses regain confidence. She stated that the current measures taken by the government are in the right direction, but far from enough. Enterprises urgently need to reduce their burdens and establish a stable and reliable policy environment, among which the most important is to firmly promote administrative burden reduction.

She emphasized that the German economy is currently in a critical period. If structural reforms are not accelerated, the burden on enterprises is reduced, and investment vitality is not restored, the economic downturn may last longer.