The German economy has been forecast to shrink by 0.4% this year, lower than a March forecast, according to a report released from the influential German Council of Economic Experts.
Germany's economy will remain largely stagnant in 2024 as well, according to the report, which forecasts only modest growth of German gross domestic product (GDP) next year of 0.7%.
The council, which is made up of five leading economists and sometimes referred to as "the Five Sages," evaluates the German government's economic policies and provide independent analysis of the country's economy.
The latest report compares to one released in March, when the experts forecast that the country would narrowly avoid a recession in 2023. Other economists have also downgraded forecasts.
The experts cited the ongoing fallout from the energy price shock, a decline in domestic demand and geopolitical conflicts as among the reasons for Germany's disappointing economic performance.
But the Council of Economic Experts indicated they are even more concerned about structural problems, such as labour shortages and too little modernization in companies. Those structural issues could drag down the economy for decades, the experts warned.
If the German government and companies do not act now, however, Germany will face completely different problems in the coming decades, the economic experts warned.
Germany faces an ageing population which could exacerbate labour shortfalls, while German industrial firms have been slow to embrace digital technology and risk falling behind global competitors, the experts said.
The experts recommend more incentives for people to work full-time, a reform of immigration policy, more investment and greater openness to new technology such as artificial intelligence.
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