Germany's social spending hits record high due to aging population, Ifo says

Key facts

• Germany's social spending hit a record high in the past year.
• Approximately 70% of social spending was related to old age and illness.
• Demographic change is the main driver of increased social costs.
• Social spending is expected to increase by 11.5% between 2019 and 2025, adjusted for inflation.
• The social budget's share of GDP rose from 29.6% to 32%.

Germany's social spending reached a new record high last year, with costs related to old age and illness accounting for approximately 70% of the total, according to an analysis by the Ifo institute. The demographic shift is identified as the primary structural driver behind this trend, increasing the burden on younger generations.

Researchers noted that the social budget is growing faster than GDP, contributing to the increase in its share of the economy, especially given the current weak economic climate. The analysis projects an 11.5% rise in social spending, or €104 billion ($121.33 billion), between 2019 and 2025, after adjusting for price effects. This has pushed the social budget's share of GDP to a new high of 32% from 29.6% in 2019.

The main cost drivers identified include additional spending for the insured elderly population on healthcare and care services, as well as higher federal pension payments.