Bundesbank Sees German Growth Decline That Immigration Can't Fix

  • Potential growth rate expected to fall to 0.75% in 2021-2025
  • Aging may have a knock-on effect on investment, productivity

Germany’s aging population will probably suck some power out of the economy in the next decade and immigration won’t be enough to fix the problem.

That’s the message from Bundesbank’s monthly report released on Monday, which looks at what’s in store for Europe’s growth engine through 2025. Researchers predict that German potential growth, or the pace of expansion the economy can sustain over the longer haul, will fall to 0.75 percent from about 1.25 percent currently.

Population changes are to blame for the damping effect. The Bundesbank estimates that the total number of people in the 15-to-74 working-age group will drop by almost 2.5 million through the middle of the next decade. That’s more than 2 million fit-for-work immigrants that the study assumes will settle in Germany over the same period of time.

“Population decline as well as the aging labor force in Germany will clearly reduce the trend pace of economic growth,” the Bundesbank said. “Additionally, demographic changes will curb accumulation of capital and the pace of productivity growth.”

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