Economic policy

© GIZ/Markus Kirchgessner

German development cooperation is particularly concerned with social-ecological economic transformation.

Economic policy approaches and instruments play an important role in the 2030 Agenda for Sustainable Development (Sustainable Development Goals, SDGs). They have a decisive influence on the socio-ecological economic transformation of the partner countries of German development cooperation. The foundations of sustainable development goals are stable framework conditions, efficient institutions, functioning markets and effective economic policy incentives.

Economic policy describes all measures with which the state seeks to influence the economy. This includes the totality of all institutions, rules, regulations and measures with which the economic order and the economic process are influenced with the aim of creating suitable framework conditions that enable the economy to achieve the goals set by society.

Economic policy is a crucial lever for shaping a social-ecological economic transformation. For example, economic policy has a direct influence on the framework conditions for the private sector and is thus crucial for the "business and investment climate" of a country. In addition, targeted structural and industrial policies can provide incentives for a socio-ecological structural transformation of the economy towards sectors with the greatest potential for achieving societal goals, e.g. for the reduction of greenhouse gas emissions, innovation and employment and.

The economic policy challenges and priorities of the partner countries are highly diverse: especially after the pandemic, many countries continue to focus on poverty reduction and pro-poor growth. However, the climate crisis has also brought the development of green industries, diversification, environmentally sustainable economic development and adaptation to climate change to the fore. For some countries, issues such as equal opportunities, the growth of the middle class, job creation in the face of flight and migration or the digitalisation of the economy are becoming increasingly important.

Actors of economic policy measures are first and foremost state and public institutions or "bearers of economic policy". Economic policy measures can be implemented at regional (state government), national (government, central bank), international (IMF, WTO) or supranational level (ECB, EU Commission). Economic policy must be transparent and rule- and evidence-based as well as designed and implemented in a participatory manner through public-private dialogues.

Due to the central position and far-reaching effects of economic activity on a society, economic policy must also integrate or harmonise with the goals of neighbouring policy and development fields.

Against this background, in order to shape and advise economic policy with our partner countries holistically and effectively, we work in the following areas:

  • Social-ecological economic transformation - GIZ advises its partner countries on the planning, content design and implementation of national development strategies that bring about a structural transformation that establishes socially just, ecologically sustainable, digital and competitive economic systems.
  • Macroeconomic advice - GIZ advises in particular regulatory policy, macroeconomic stability, quality of economic development and macroeconomic transformation, where macroeconomic decisions have a major influence on the sustainable economic development of a country.
  • Economic policy for digital transformation - GIZ contributes to the expansion and modernisation of digital infrastructure in its partner countries, to supporting the economy in its digital transformation and to strengthening the framework conditions for digital business.
  • Innovation policy - GIZ advises its partner countries on the mobilisation of internal and external knowledge resources, which are essential for improving productivity and competitiveness in order to tap the value creation potential of previously marginalised population groups and/or reduce the economy's ecological footprint. In particular, innovations that contribute to social and environmental sustainability are promoted. We also advise on the assessment of social and ecological consequences of innovations.
  • Industrial and structural policy - GIZ supports its partner countries in designing and implementing green industrial strategies, building sustainable industrial sites and clusters, compensating for market failures and promoting renewable energy subsidies.
  • Business and investment climate - this field of application is advised by GIZ to strengthen the crucial framework conditions for business start-ups and growth. Here, reforms aim to optimise the essential role of governments in regulating markets to achieve desirable economic, social and environmental outcomes.
  • Competition policy - as part of its technical cooperation, GIZ supports its partners in establishing or strengthening competition authorities and in planning and implementing reforms in the field of competition law in order to promote entrepreneurial efficiency and fairness in markets. An important sub-area is advising on competition-oriented framework conditions and regulations in the digital economy and platform economy.
  • Resilience - economic development in partner countries is often subject to great fluctuations. GIZ supports partner countries in reducing their vulnerability to crises - pandemic, financial crisis, climate crisis.
  • Good economic governance - GIZ supports partner countries in building strong institutions, transparent decision-making processes and participation, as they are crucial for sound economic policies and the sustainability of economic development.

GIZ is actively shaping the current debate on sustainable models of prosperity, and its projects promote various economic models that contribute to a socio-ecological economic transformation. See also: From Growth to Wellbeing.