Uncertainty Weakens the Economy: IW Economic Forecast and IW Economic Survey Spring 2019

The economy is expected to regain its footing in the first half of 2019, but will proceed at a very subdued pace. With weakened growth in world trade and global investment activity suffering from geopolitical uncertainties, German export expectations remain moderate. They are sufficient to keep corporate investment on its upward trend – but at a snail’s pace. The German economy will continue to be stimulated by investments in construction and by a number of consumer-related service industries. Though expanding employment will still drive consumer spending, the employment outlook for German companies has cooled. The average number of people in employment will rise to 45.5 million by 2020, when the number of jobless will be just over 2 million, corresponding to an unemployment rate of 4.5 per cent. Real GDP will grow by slightly less than 0.7 per cent in 2019 and by just over 1.5 per cent next year, reflecting a considerably higher number of working days. Inflation in the forecast period is expected to exceed 1.5 per cent by a small margin. Despite a significant increase in government spending, public finances will be in surplus.