All economic research institutes and associations will publish their economic outlook for 2023 in the next few days. The federal government has just presented its 2023 projection. It turns out: Courage to tell the truth? none.
It’s written in black and white in the federal government’s rose-colored inflation forecasts; at least the intention of the other participants can be sensed: they are reluctant to tell the truth to the population.
Many believe that in this trying time it is their patriotic duty to spread optimism now. One does not want to inform first, but to reassure. Potemkin villages are built for fear of political unrest.
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ThePioneer does not want to participate in this form of whitewashing. We believe that the Austrian essayist Ingeborg Bachmann is right: “The truth is reasonable for people.”
So here – with all the necessary clarity – our economic forecast for 2023 in 19 graphics:
Prediction 1: 2023 will be the year of a worldwide accelerating devaluation of all means of payment. Inflation is here to stay. The reasons for the high inflation are the persistently high raw material prices and the continuing rise in energy costs. In their joint forecast, the German economic institutes are now anticipating average inflation of 8.8 percent in the coming year. Economics Minister Robert Habeck would like the inflation rate to be lower, but that is not the reality.
Prognosis 2: The countries’ addiction to loans will continue to increase. Since the governments want to cushion the consequences of the recession for their voters, net borrowing is increasing – despite more expensive refinancing. In the course of the Covid pandemic, the global national debt has increased by 25 percent to 65.4 trillion US dollars – this corresponds to 19 times the German economy. Caution: The risk of sovereign debt crises is increasing, especially in developing countries.
Prediction 3: 2023 will be the year of a global profit squeeze. All those companies that cannot pass on rising wages and rising costs, e.g. those of their intermediate products, to the end consumer will suffer shrinking profits or even losses. The Economist predicts: “Profitability will be squeezed, while corporate investment will slow amid rising interest rates.”
Prediction 4: In 2023 we will experience a historic wave of bankruptcies in the West, which is likely to affect small and medium-sized companies in particular. Many companies that are already generating low returns will slide into the red in the coming year. Wherever low interest rates and cheap energy costs were calculated, there is a risk of losing business. Yesterday’s calculation is tomorrow’s tombstone.
According to Atradius analysts, insolvencies in Germany will increase by 25 percent in the coming year. For comparison: The experts forecast an increase of 81 percent for the USA and 43 percent for France.
Prognosis 5: 2023 will lead to a power outage for direct investments in Germany. The more expensive energy base and the shrinking global demand are forcing companies at home and abroad to reconsider their investment decisions in favor of Germany as a business location. The BDI reports: Every fourth company is considering or is already in the process of relocating parts of production and jobs abroad.
Prediction 6: We will see a further increase in geopolitical tensions – and with it a renewed wave of migration. Actual tensions, such as the Ukraine war, or even feared tensions, such as an invasion of Taiwan, put families under stress and lead to alternative living locations being sought. Since the beginning of the war, 1.3 million people have come to Germany from the Ukraine alone.
Prediction 7: 2023 will be the year of heightened rivalry for world technological leadership. The USA does not want to withdraw from all export and import relations, but they do want the end of cooperation in the high-tech sector. The US Bureau of Industry and Security has imposed sanctions on China’s semiconductor industry. The partners of the USA, for example Germany, should also be urged to decouple.
Prediction 8: China will once again be the world’s growth engine in 2023. The IMF expects growth of 4.4 percent for China and one percent for the USA. The reason for this disparity: The Chinese economy has neither inflation nor energy problems. The USA, on the other hand, is being deliberately led into a mild recession – also by the interest rate policy of the Fed – in order to slow down the rise in prices.
Prognosis 9: Germany’s relative decline will continue at an accelerated pace. In particular, the changed situation in the energy market, which brings tangible competitive disadvantages for an industrial nation like Germany compared to the USA and China, is forcing Germany onto a lower growth path. According to IMF forecasts, the German economy will shrink by 0.3 percent in the coming year, more than all other European industrial nations.
Prognosis 10: The productive core of Germany is shrinking. The country cannot achieve its potential growth in 2023 either. Rising energy prices and a shortage of skilled workers – the latter is a matter of concern to associations but not addressed by politicians – mean that Germany is unable to exploit its economic potential.
According to the Federal Employment Agency, the number of skilled workers of the typical working age will fall by 150,000 this year. This melts the productive core of our country. According to the CEO of the employment agency, Germany needs around 400,000 “targeted immigrants” per year.
Prediction 11: 2023 will be the year of massive real wage losses. The reason: The high inflation and in particular the increase in energy and food prices cannot be offset by wage increases. The trade unions show economic responsibility and do not even try to accelerate the wage-price spiral that has started. The disadvantage: Moderate wage settlements increase real wage losses.
Prediction 12: 2023 will be the lost year in the fight against the climate catastrophe. In the wake of the global energy crisis, coal, oil and gas are being activated and reactivated. According to calculations by the Economist Intelligence Unit (EIU), gas consumption in Europe will decrease slightly (minus 1.7 percent), but is expected to increase by 2.4 percent in Asia. Coal consumption will benefit from increased policy focus on energy security and will increase for the third consecutive year in 2023, albeit marginally. Oil consumption will increase by 1.4 percent, especially in Asia, where consumption will increase by 2.9 percent.
The small group of oil giants in particular will also benefit in 2023. Saudi Aramco, currently the second most valuable company in the world, should have a good chance of regaining the lead in the global economy.
Prognosis 13: Life expectancy is increasing again. According to the Federal Statistical Office, women in Germany are currently 83 years old on average, while men are only 78 years old. In the Covid pandemic, life expectancy in Germany fell by almost half a year, and in the USA it even fell by almost two years. For 2025, a life expectancy of 84.2 years or 79.7 years can be assumed in Germany, according to the Federal Statistical Office in a model calculation for the period up to 2025.
Prediction 14: The world will increasingly be ruled by autocrats. The number of people living in a democracy fell from 3.9 billion to 2.3 billion between 2017 and 2021. In the same years, the number of people living in liberal democracies – i.e. those who enjoy free elections, freedom of expression, freedom of religion and a right to private property – fell from 1.2 billion people to one billion people. This process will intensify as economic instability increases.
Prognosis 15: Poverty in Germany is likely to increase. According to the Federal Statistical Office, 15.8 percent of Germans will already be living at the so-called poverty line in 2022. The poverty line is currently defined as a monthly household income of 1250 euros per person living alone. Around ten million German employees are currently working for the minimum wage. The economic crisis pushes low earners and small retirees into the red zone, where starvation and freezing begins for quite a few. The last time that happened in Germany was in the immediate post-war period.
Prognosis 16: The supply on the housing market will continue to become noticeably scarcer. Inflation and rising interest rates have made large parts of the real estate market, which was calculated with a minimal interest burden, unprofitable. Plus: Many would-be builders are currently unable to get mortgage loans due to increased risk provisioning by the banks. According to the ifo Institute, 16.7 percent of all new construction projects were canceled in September. The government target – 400,000 new homes in 2023 – is unreal under these conditions.
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, Chairman of the Management Board of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
Prognosis 17: The share of renewable energies will continue to increase, albeit more slowly than planned.
According to data from the International Energy Agency, the share of renewable energies in energy production worldwide will increase by eleven percent, and rapid expansion is expected in Asia. However, the agency is also optimistic for Europe: “The increase in coal consumption in Europe is expected to be only temporary as a strong pipeline of new renewable energy projects will add around 50 gigawatts of capacity in 2023.”
Prognosis 18: The electric car will continue its triumphal march. According to forecasts by the data team at The Economist, EV sales will increase by 25 percent year-on-year to 10.8 million vehicles in 2023. The analysts applaud: “Governments are innovating in incentivising electric vehicles to encourage sales of environmentally friendly vehicles without incurring excessive costs and without favoring high-income households.”
Despite this success of the electric pioneers: in many markets, including the USA, the combustion engine remains number one.
If you don’t want the negative forecasts to become reality, you have to work hard for it. Government whitewashing of grievances is not an option for anyone who loves progress. If you want change, you have to acknowledge the present. Or as the German dramatist Friedrich Hebbel used to say: “The utopian sees paradise, the realist sees paradise plus a snake.”
