Joint Economic Forecast, Fall 2016: German economy on track – economic policy needs to be realigned

The German economy is experiencing a moderate recovery: the GDP is expected to grow by 1.9 percent this year, 1.4 percent next year, and 1.6 percent in 2018. Over the course of the forecast period, capacity utilization will be somewhat higher than the long-term average. Nevertheless, corporate investment’s contribution to the current upswing is minimal: the global economy is generating only minor stimulating effects, which means that exports are only increasing moderately; as well, the extremely low interest rates on the capital market are likely to reflect not only the current monetary policy, but also the low growth expectations. All of these factors are inhibiting equipment investment, and thus consumption continues to be the main growth driver. Private consumption is benefiting from the sustained increase in employment; the high expenditure for housing and integrating the refugees is still having a strong impact on public spending. Residential construction is getting a boost from the low interest rates.