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Economics Update September 2021 - Germany's Economy Before the Election: Hope for a New Dawn

Bad Homburg, 09/06/2021
by Axel D. Angermann, FERI
  • Structural weaknesses overshadow high economic performance
  • Digitisation is increasingly becoming a negative location factor
  • Next federal government must tackle structural challenges

After 16 years of a Chancellor Merkel government, Germany's competitiveness is almost back to where it started: When Angela Merkel became chancellor in 2005, Germany ranked 21st out of 63 countries in the IMD's Lausanne ranking. This was followed by an improvement to 6th place by 2014, but since then things have been going downhill again: currently Germany ranks 15th in the summary of all indicators. On the plus side, the country's high economic performance continues. In terms of the indicators of growth, trade, employment and price stability, Germany is ranked third overall. The fact that the overall picture looks considerably worse is due to increasing structural weaknesses that have already become apparent in the management of crises in the recent past. In terms of tax policy, Germany ranks 57th: this is probably mainly due to the German government's inaction on tax legislation, while many other countries have cut (corporate) taxes. In the institutional framework for business, the country fell from 7th place in 2015 to 21st in 2021, mainly due to excessive bureaucracy (36th). The opportunities to start companies and the handling of the associated bureaucratic hurdles have also not improved in recent years.

Only Average in Digitisation

Germany performs exceptionally poor in all categories related to digitalization. In communications technology, the country fell from 7th to 55th place during Merkel's term in office. The situation is similarly bad for people's digital and technological skills (54th place). This is not just a problem with governance: Germany's business agility, entrepreneurship scores in general, and use of Big Data and advanced analytics tools in companies are also international average at best. While the assessment of small and medium-sized enterprises is still the world's best (currently ranked 3rd), large companies have lost ground and rank only 19th (in 2014 it was still ranked 7th).

A Lot of Work Awaits New Government

In addition to the issue of climate protection, other structural challenges must also be tackled in the coming years: A competitive tax system, the reduction of excessive regulation, more entrepreneurship and less risk aversion, better educational opportunities for all, the guarantee of equal participation opportunities in general, an appropriate representation of women in leadership positions and also social cohesion are ultimately prerequisites for the country's economic potential to be exploited in the long term. This is all the more true in an ageing society - in this respect, too, Germany tends to occupy the lower ranks, without being able to change anything about this, at least in the medium term.

No matter who leads the next government as chancellor or chancelloress and which combination of colours ends up at the cabinet table: Clearly more work awaits the next federal government than Ms Merkel wanted to put herself through in the last quarter of her term.


About Axel D. Angermann

As Chief Economist of the FERI Group, Axel D. Angermann analyses the economic and structural developments of all markets that are important for asset allocation. This data forms the basis for the strategic orientation of FERI's asset investments.

Angermann has been responsible for the analyses and forecasts prepared by FERI for the overall economy and individual sectors since 2008. He joined the company in 2002 as an industry analyst. His professional career began at the Max Planck Institute for Economics and the German Chemical Industry Association. Angermann studied economics in Berlin and Bayreuth.


About FERI

Founded in 1987 and headquartered in Bad Homburg, Germany, the FERI Group has developed into one of the leading investment houses in the German-speaking area. FERI offers tailor-made solutions for institutional investors, family assets and trusts in the following areas:  

The FERI Cognitive Finance Institute was formed in 2016. It is the strategic research centre and creative think tank of the FERI Group. The Institute focuses on innovative analyses and the development of methods for long-term oriented economic and capital market research. 

FERI and MLP currently manage assets of EUR 51.4 billion, including EUR 13 billion in alternative investments. The FERI Group is headquartered in Bad Homburg and has locations in Dusseldorf, Hamburg, Luxembourg, Munich, Vienna and Zurich.



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D-61348 Bad Homburg

Axel D. Angermann
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Katja Liese
Member of the Management Board
Head of Press & Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
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Katja Liese
Member of the Management Board
Head of Press & Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

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