Frankfurt — The head of one of Germany's leading economic institutes, the ifo institute, has said that the labour shortages in the country and the transition to renewable energy will weigh on economic growth in the longer term.
Ifo president Clemens Fuest told financial news agency dpa-AFX that "in Germany, growth will be weaker in the future."
Demographic developments were also leading to a shrinking supply of workers, he said.
"The shortfall in the electricity supply in Germany was a mistake," Fuest said, alluding to the end of nuclear power generation, as well as the consequences of the Ukraine war meaning a reduced supply of Russian gas.
Recently, there have been warnings from companies in the chemical industry that they might have to relocate parts of their production abroad because of high energy costs.
These plans "must be taken seriously," said Fuest. Providing more energy could help to improve the situation.
However, he rejects an electricity price cap. "I expect electricity prices in Germany to remain permanently higher than in other countries," Fuest said.
The greatest burden on the economy is however the shortage of labour in many sectors, he said. This would "continue to slow growth in the coming years," Fuest said.
New legislation to attract skilled labour from abroad and improved childcare provision could help the situation, he said.
Another economic burden, according to Fuest, is persistent high inflation in the eurozone. Nevertheless, he did not expect the European Central Bank (ECB) to raise key interest rates further.
Interest rates would stay at the current level for a longer period of time, he believed.
©2023 dpa GmbH. Distributed by Tribune Content Agency, LLC.