Fra IFO:
The ifo Institute has reaffirmed its spring forecast of 0.6 percent economic growth in 2019. “Economic development is divided. The export-oriented manufacturing sector, which generates about a quarter of the value added, is in recession. At the same time, domestically oriented service providers and the construction industry are recording robust and sometimes strong growth,” says Timo Wollmershaeuser, Head of ifo Economic Forecasts.
“However, there are increasing signs that industrial weakness is gradually spreading to the domestic economy via the labor market and deep value chains,” Wollmershaeuser adds. This is one reason why ifo lowered its forecast for the coming year by 0.1 percentage points to 1.7 percent.
Adjusting for the above-average number of working days in 2020, economic growth will be only 1.3 percent. “That means the German economy will enter the coming year without any momentum,” Wollmershaeuser says.
The economy will be driven by private consumer spending, which will increase by 1.4 percent in 2019 and by 1.3 percent in 2020. But investments will also grow quite strongly, at 3.0 percent and 2.8 percent respectively, driven by investment in construction, which will increase by 4.0 percent and 3.0 percent respectively.
Exports will grow by just 1.3 percent in the current year in response to the cooling global economy. “Economic policies that attempt to change the globalized economic order through isolation, sanctions, and threats have increased uncertainty worldwide, cooled industrial activity, and caused world trade to collapse,” Wollmershaeuser says.
Assuming that the many and varied risks associated with this do not materialize, German exports will normalize again next year and increase by 3.8 percent.
Unemployment is declining at a noticeably slower rate. The number of unemployed people will fall from 2.25 million this year to 2.19 million next year. This represents 4.9 percent and 4.8 percent of the labor force respectively. Employment growth is also losing momentum. Consumer prices will rise by 1.5 percent and 1.8 percent respectively.
The general government surplus (federal government, Laender, municipalities, social security funds) will fall from EUR 48.7 billion to EUR 31.7 billion. Germany’s much criticized current-account surplus will continue to fall from 7.0 percent to 6.9 percent of economic output.
