Seemingly Robust, Actually Fragile

Superficially the German economy appears astonishingly robust. In 2016 real GDP in Germany is expected to grow by an annual rate of 1 ½ per cent, in 2017 it will be 1 ¼ per cent. Employment will continue to rise and the national budget will stay in the black. However, this steady development is to a large extent the result of a boom in consumption encouraged by special factors: On the one hand, low energy prices and financing costs are boosting private spending. On the other hand, the German economy is being stimulated by additional public expenditure on the accommodation and integration of refugees. Without these exceptional phenomena German business activity would be on the verge of stagnation as exports are slowed by the weakness of the global economy. This is also reflected in the modest level of corporate investment. The global market for German goods and services is threatened by a multitude of stress factors. Far from waning in the aftermath of the crisis in the world’s financial markets these risks have actually grown in scope. Such an environment leaves no room for additional demands on the state.