(de-news.net) – Germany’s long-term economic growth will increasingly depend on technological innovation as demographic decline constrains the labor force, according to a Prognos study. Separate labor-market projections for Bavaria indicate persistent worker shortages through 2035 despite weaker economic growth, highlighting demographic change as the principal long-term challenge.
A study by the Prognos Research Institute, conducted on behalf of the Bavarian Industry Association (vbw), projects that Germany’s economy will record only modest expansion through the middle of the century, with average annual growth of approximately 0.9% through 2045. The analysis concludes that maintaining even that limited pace of growth will depend increasingly on the successful integration of digital technologies, artificial intelligence, and other technological innovations across the economy, alongside at least partial progress in addressing longstanding structural policy challenges.
The study argues that demographic trends will fundamentally reshape Germany’s growth prospects. Persistently low birth rates are expected to reduce the size of the available workforce over the coming decades, while manufacturing has already reached a high level of automation. Against that backdrop, technological progress is projected to become the principal source of future economic expansion, with the researchers indicating that, in its absence, Germany’s economy would likely contract over the longer term. The projections also assume that policymakers will succeed in increasing labor-force participation among groups including women and older workers, helping to slow—but not reverse—the decline in the number of available workers.
Researchers further anticipate a broad restructuring of Germany’s economy as production, employment, and economic activity shift toward different industries, occupations, and services. The report identifies digitalization, the transition toward a lower-carbon economy, demographic change, geopolitical developments, and a changing international division of labor as the principal forces expected to drive that transformation. Together, these structural trends are projected to reshape both the composition of economic output and the nature of employment across the country.
Study links global economic realignment with mounting workforce challenges in Bavaria
Beyond Germany, the study projects that the balance of global economic activity will continue shifting toward emerging markets, which could account for roughly half of worldwide gross domestic product by 2045. India and Indonesia, along with several African economies, are expected to benefit from comparatively younger populations, expanding infrastructure investment, and the continued economic integration of rural regions. Those demographic and investment advantages are projected to strengthen the long-term role of emerging economies within the global marketplace.
China, despite facing slower growth as a result of population aging and broader structural adjustments, is nevertheless expected to remain one of the world’s principal economic engines. According to the study, China’s real gross domestic product is projected to surpass that of the European Union later this decade. The United States, however, is expected to maintain a narrow lead over China, reinforcing projections of a long-term bipolar global economy dominated by the world’s two largest economies. Within that framework, the European Union is projected to remain an important economic center while falling short of matching the overall weight of either superpower.
A separate 2026 update to Prognos’ labor-market projections for vbw concludes that labor shortages are likely to remain widespread across Bavaria through 2035, even under assumptions of weaker economic growth. Based on projections covering all 96 Bavarian districts and independent cities across 36 occupational groups, the analysis finds that demographic developments will cause workforce supply to decline more rapidly than labor demand. Under the baseline scenario, the labor force is projected to decrease by 4.8% between 2025 and 2035, while labor demand falls by 3.9%, resulting in an estimated shortage of approximately 290,000 workers. Even under a more pessimistic economic outlook, the projected shortfall remains substantial at roughly 210,000 workers, underscoring the conclusion that demographic change, rather than weaker economic performance, represents the primary long-term constraint on Bavaria’s labor market.
The report also identifies significant regional disparities across Bavaria. Rural districts in the northern part of the state are projected to experience the steepest declines in workforce availability, while metropolitan regions are expected to perform comparatively better. Future labor demand is likely to vary according to the industrial composition of individual regions, although no district is projected to record a significant labor surplus by 2035. Occupational imbalances are likewise expected to differ considerably between regions, suggesting that targeted policy measures—such as improving work-family balance to reduce part-time employment where appropriate—could help ease labor shortages in specific local markets. Although the authors caution that forecasts at the local level inevitably involve greater uncertainty because of limited data, changing commuting patterns, and region-specific structural factors, they conclude that the projections provide a robust analytical foundation for developing more precisely targeted labor-market and workforce policies.
