Gesperrte Brücken, Schulen ohne funktionstüchtige Heizungen und andere Mängel der öffentlichen Infrastruktur zeigen, dass Deutschland zu wenig investiert.
Germany faces enormous challenges in modernizing its capital stock. After neglecting public investment over the last two decades, it is now necessary to update the infrastructure and gradually reduce the investment backlog.
The current account surplus in Germany has grown rapidly especially since the early 2000s and this development has been widely criticised. One of the recommendations of the European Commission and other institutions is to increase public investment as a means to reduce the current account surplus. Indeed, Germany needs a broad investment programme in the field of infrastructure, digitalisation and education, and considering the low interest rate there cannot be better times for it.
Investments are fundamental for entrepreneurial action. The IW-Economist Hubertus Bardt explains in his contribution, how the word market is changing and which investment projects are necessary for the German economy.
German companies’ business operations are increasingly being hampered by infrastructure deficiencies. Following up on their initial 2013 study, the German Economic Institute (IW) used their regular survey on the business cycle to examine how the condition of central infrastructure networks affects companies.
The global economic climate has deteriorated. The protectionist tone of the US administration is provoking a world-wide trade conflict which may well trigger other problems, such as financial crises in China or in Europe.
The German economy remains on an expansion course, with real gross domestic product expected to grow by over 1 ½ percent in 2017 and by 1 ¾ percent in 2018, the lower number of working days acting as a brake on macroeconomic performance in the current year.
The economic outlook for Germany, the Eurozone and China looks rather grim according to the IW Business Cycle Traffic Light. Almost all of the important economic indicators have stagnated or experienced a setback in the fourth quarter of 2015. While things look a little better in the US, consumer confidence has decreased dramatically in all four regions.
The Eurozone inflation rate remains still low. Therefore, the European Central Bank (ECB) is likely to increase its large-scale asset purchase program on Thursday. Moreover, it is expected that the ECB will cut interest rates even further into negative territory. But negative interest rates will worsen the situation, according to a new study of the Cologne Institute for Economic Research (IW).
Investors eagerly await the Federal Reserve Bank’s and the European Central Bank’s forthcoming interest rate decisions. When will both central banks start hiking their policy interest rates? A study from the Cologne Institute for Economic Research (IW) shows that the Fed will start its lift-off this year, while the ECB will stick to its accommodative monetary policy further on.
Financial markets are eagerly waiting for the US Federal Reserve Bank (Fed) to increase its policy interest rate, the Federal Funds Rate. Experts have expected a Funds Rate hike this September since months. In the past, however, market interest rates showed a variety of responses to the Fed’s decisions. And this time the low US-inflation rate could cause such an “interest rate conundrum“ again.
Head of the Research Group Macroeconomic Analysis and Forecast
Tel+49 221 4981-776
Mailgroemling@iwkoeln.de
