The influential German Council of Economic Experts on Wednesday forecast that the country's economy would decline in 2023, with only a weak recovery next year.

The predictions are more pessimistic than those in a previous report by the panel in March, which forecast that Germany would narrowly avoid a recession in 2023.

What did the experts say?

The panel of five selected economists, also known as Germany's "economic sages," predict the economy will shrink by 0.4% this year and will remain largely stagnant in 2024 as well.

However, they did envision modest growth of German gross domestic product (GDP) of 0.7% for 2024.

The experts' job is to evaluate the German government's economic policies and provide independent analysis.

They pointed to the ongoing fallout from the energy price shock as one reason for the poor performance, given the size of Germany's energy-intensive industrial sector.

"Germany has recorded the lowest growth of all economies in the euro area since the beginning of the coronavirus pandemic," explained the five economists. An even deeper slump was prevented by "the extensive economic policy measures to convert the energy supply and to cushion the economic effects of the energy crisis," they said.

The panel also cited a decline in demand domestically, and in key markets abroad such as China, as reasons for Germany's disappointing output.

Warning over 'structural' issues

The experts also indicated they had concerns about structural problems, such as labor shortages and the failure of many companies to sufficiently modernize.

Such issues could drag the economy down for decades, the experts warned, unless the government took action.

Germany's aging population could make labor shortfalls worse, the group said, while German industry has been slow to embrace digital technology and companies run the risk of falling behind international competitors.

The sages recommended giving people more incentives to work full-time, reforms to immigration policy, greater investment, and more openness to adopt new technology.

The panel also recommended that Germany raise its retirement age, although they did not give a specific recommendation about what that age should be.

rc/nm (dpa, AFP)