“High-tech industry still too small”: According to the Ifo Institute, Germany is poorly prepared for the AI boom

The administration is not digitized enough, the education system is not adapting quickly enough: According to the Ifo Institute, Germany lacks the important foundations for taking advantage of the opportunities offered by artificial intelligence.

According to the Ifo Institute, Germany lacks important prerequisites for exploiting the growth potential of artificial intelligence. “The high-tech industry is still too small and the administration is not digitized enough,” said Ifo expert Oliver Falck in an analysis by the Munich Economic Research Institute. “And the education system is not adapting quickly enough to the changes brought about by AI,” added the head of the Ifo Center for Innovation Economics and Digital Transformation.

Starting today, Monday, representatives from politics, science and business will come together at the federal government's two-day digital summit to discuss artificial intelligence (AI), cybersecurity and digital sovereignty.

According to Ifo, the ICT sector (information and communication technologies) only contributes 4.6 percent to gross value added in Germany. This puts the proportion in the lower EU middle range. When it comes to ICT services, Germany imported services worth eleven billion dollars more in 2025 than it exported. “No other EU country is more dependent on foreign countries in the area of ​​information and communication technology than Germany,” said Ifo researcher Christian Pfaffl.

According to the Ifo analysis commissioned by the Chamber of Commerce and Industry for Munich and Upper Bavaria, there has been little progress in the digitalization of public administration - although it could offer better services to citizens and companies with the help of AI and the extensive existing administrative data. For example, Germany is still in the experimental phase when it comes to providing pre-filled forms, while this has long been largely implemented in neighboring countries such as the Netherlands, Denmark, Poland and Austria, it was said.

The Ifo researchers see another problem in the education sector: when it comes to skills above the basic level, Germany is below the EU average. About 40 percent of eighth graders do not reach Level 2 of computer and information literacy. “AI applications are spreading rapidly, but too many people lack the knowledge to use them productively,” explained Falck. A lack of specialist expertise is the most common reason why companies do not implement planned AI projects.