Population aging weighs on Germany - In the period 2019-2025, social spending increased by 11.5%
The aging population is significantly increasing pressure on Germany's public finances, while social spending has reached a record level, according to an analysis published by the German Ifo institute.
According to the analysis, old-age and illness-related spending accounted for around 70% of Germany's total social spending last year. These categories have also been responsible for more than 80% of the real increase in social spending since 1992.
In the period 2019–2025, social spending increased by 11.5%, or about 104 billion euros, adjusted for inflation. In the same period, the share of social spending in the economy increased from 29.6% to 32%, marking a new record.
According to the analysis, demographic changes are the main structural factor behind this trend. The growing number of elderly people is increasing the costs of pensions, health insurance and long-term care.
The social budget is growing faster than GDP, the analysis highlights, adding that the weakness of the German economy is also contributing to the increase in the weight of social spending.
Experts warn that demographic developments could further increase the financial burden on the welfare system. With a growing number of pensioners and a relatively smaller working population, Germany faces the challenge of financing pensions and social services without further harming economic growth.
The problem is expected to become even more important in the coming years, as generations born after World War II are retiring, adding pressure on the social system and the federal budget.
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