Economic Outlook

The German economy is regaining momentum

Kiel Institute Economic Outlook Germany, Nr. 14 (2015 | Q4)

German GDP is expected to increase by 1.8 percent (2015), 2.2 percent (2016), and 2.3 percent (2017). With capacity utilization currently being at normal levels, Germany is on the road to overheating in the next years. GDP growth is backed by high growth rates in private consumption. In addition to the strong labor market that comes along with increasing employment and wages, temporary factors, such as low oil prices, lower income taxes, and higher trans­fer payments are further stimulating consumption in the current and the next year. Moreover, with in­creasing capacity utilization and very favorable financing conditions investment is expected to pick up over the forecast horizon. Exports are expected to regain momentum after a weak second half of the current year due to solid GDP growth in other ad­vanced economies and strong gains in price com­petitiveness due to the depreciation of the euro. Ad­ditional government expenditures due to the high number of refugees will stimulate GDP growth somewhat but will not become a main driver of busi­ness cycle dynamics in Germany.