BERLIN, October 19. /TASS/. The German economy has lost around 420 billion euros in investments since 2020 due to the implications of the coronavirus pandemic and geopolitical crises, the German Economic Institute (IW) said in its research.
According to experts, German businesses invested approximately 470 billion euros less than projected on the basis of historical trends during the reporting period. This decline is equivalent to nearly 12% of the total volume of private investment since 2020. At the same time, Germany's public investments grew by 50 billion euros. The net losses of the investment sector taken together and adjusted for price increases are estimated at 420 billion euros, the institute said.
The research indicates that private investment in Germany will not be able to return to pre-crisis levels until at least the end of 2026. This figure remained more than 10% below the 2019 annual average in the second quarter of the current year. The public sector shows the opposite trend, with public investment volumes exceeding 2019 figures by 20%. Such growth has been driven by the creation of a special infrastructure development fund and the temporary exemption of defense spending from the so-called "debt brake" (a rule that limits the size of the German federal budget deficit), the institute noted.
Public appropriations cannot fully replace private capital to guarantee long-term economic growth, the institute said in its research. Berlin's steps to attract investors as part of the ongoing Invest in Germany summit are viewed positively but experts call them insufficient. According to analysts, the country primarily needs more attractive conditions for doing business. The authors of the study cite deteriorating framework conditions, such as high electricity costs, significant labor expenses, and excessive bureaucracy, as the main factors deterring companies from Germany.
The institute compared the dynamics of Germany's gross fixed capital formation from the first quarter of 2020 to the second quarter of 2026 with a hypothetical baseline scenario that excluded the pandemic and geopolitical shocks, the institute said. Germany's macroeconomic indicators for the period from 1991 to 2019 served as the basis for the calculation.