(Bloomberg) -- Germany needs to carry out reforms to improve competition and cut bureaucracy in order to help kickstart Europe’s biggest economy, according to OECD Chief Economist Alvaro Santos Pereira.
The Paris-based organization forecast on Wednesday that the country’s gross domestic product will only grow by 0.1% this year, well behind expected rates in Italy, France, Spain and the UK.
“Germans should focus first of all on improving their infrastructure — especially on digital infrastructure they are lagging compared with other parts of Europe — but in particular it’s time to go back to reforms in Germany,” Pereira told Bloomberg Television. “There are many competition-friendly reforms that are needed, there are too many barriers to services in many parts of the German economy. It’s still too difficult, too much red tape around, and we think this is having an impact.”
He added that Germany could “increase growth by 3% over 10 years if they would do these type of reforms.”
The need for action comes on top of structural issues — such as Germany’s competition with China in the manufacturing sector and a drop in demand from the world’s second-largest economy — and cyclical problems that include coming out of the energy crisis, a manufacturing slump and prudent consumers opting to save more than elsewhere in Europe, according to Pereira.
The chief economist added that the US economy remains “very robust” compared with the rest of the world.
“We see China slowing down quite significantly, we also think that Europe is not doing as well as it could, and other parts of the world are not doing so well,” he said. “Under the circumstances, knowing we had a huge pandemic and an energy crisis, the US is doing fairly OK.”
--With assistance from William Horobin.
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