February 16, 2016

Prognos study Economy 2040 - Forecast for Germany and Bavaria

The study Economy 2040 is the only worldwide report in elaborating long-term future forecasts for 42 countries, representing 90 percent of the world’s economic performance. The study is conducted by Prognos AG. As a leading think tank for future-oriented studies, Prognos AG advises policymakers and businesses in Germany and Europe.

The future of the German economy

Prognos expect an average economic growth of 1.3 percent per year for Germany by 2040. Up until 2020, the development is anticipated to be moderate due to the effects of the financial- and debt-crises and the resulting reluctance to invest. In the following decade, the momentum is set to speed up. By the end of the forecast-period, Prognos predict a weakened growth rate as labor becomes scarcer and wages thus increase.

According to the Prognos study, the most important growth engine will be private consumption. Investment will increase at a slightly below average rate. Exports will continue to contribute significantly to Germany’s economic growth and the export economy will benefit from the dynamic world trade.

Prognos calculations show that Germany’s population will drop from currently 82 million to 78 million by 2040. Only half of the population will be of working age, 18 percent less than now.

The future of the Bavarian economy

The Bavarian economy will have an average economic growth of 1.5 percent per year by 2040, 0.2 percent more than Germany. This above-average growth rate can be explained by the slower demographic change. Prognos calculate that up until 2027, Bavaria’s population will continue to increase. In 2040 it will lie only just below the current rate. Additionally, foreign trade contributes more to economic growth in Bavaria than it does to the German federal economy. The strong Bavarian industry plays an important role in the higher growth rate.

In our next issue we will summarize the predictions Prognos has made for the US economy.