Economy Buoyed by the Labour Market: Successes Not to Be Squandered IW Economic Forecast Spring 2017

This economic continuity is astounding in view of the high level of political uncertainty. Indeed, the short-term outlook for the global economy is being revised upwards. Despite the political dangers and latent hostility to trade, at a rate of around 3 ½ per cent world production is set to expand more rapidly than in previous years, though global trade is growing at a slightly slower pace. This environment is providing German foreign trade with a perceptible impetus. Overall, the contribution of foreign trade will dampen German growth slightly in 2017 and 2018 and the country’s current account surplus is expected to shrink. The outlook for German corporate investment has again improved considerably, with investment in construction particularly resilient. In 2017 and 2018, a total of 1 million new jobs will be created in Germany and unemployment is expected to fall to an average of just over 5½ percent in 2018. As a result of this ongoing boom in the labour market, private consumption will continue to be the main economic stimulus. Government consumption expenditure also remains strongly expansive, so that private and public sector consumption combined will contribute more than 1 percentage point to growth in each year of the forecast. Price trends will slow the rise in consumption much more clearly than in previous years. With government spending rising more rapidly than revenues, the public sector surplus is expected to fall to around 13 billion euros in 2018.