BERLIN (Reuters) – Germany’s DIHK chambers of industry and commerce expect Europe’s largest economy to shrink by 0.5% this year as high energy prices, heavy bureaucracy, a skilled workers shortage and weak domestic demand weigh on economic output.
A DIHK poll of more than 27,000 companies showed that of those surveyed, 35% expect business to deteriorate in the next 12 months with only 14% expecting an improvement.
“The bad mood among companies is becoming more entrenched,” said the DIHK in Berlin on Thursday, adding that it would be only the second time in Germany’s post-war history where the economy contracted for two years in row. The first case was in 2002 and 2003.
“The is a clear alarm signal that Germany and Europe must take seriously,” DIHK head Martin Wansleben said in a statement.
The government next week will publish its economic growth forecast for this year. A source with knowledge of the matter said Berlin will slash its growth forecast to just 0.2%, although still a much more optimistic view than the DIHK’s.
Three out of five companies see the country’s economic policy as a business risk, the survey showed, adding that 33% of firms plan to reduce investments in Germany in the next 12 month, while 24% said they planned expansion.
Germany’s ruling coalition wants to present proposals for strengthening Germany as a business location by spring, with experts saying this could include tax reform and reducing bureaucracy.
(Reporting by Christian Kraemer; Writing by Riham Alkousaa; Editing by Toby Chopra)
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