The German Council of Economic Experts (GCEE) presented Chancellor Angela Merkel with a late re-election gift this week: A forecast of steady economic growth for the next two years. Germany’s GDP is expected to grow by 2.2 percent in 2018, on the back of a predicted 2 percent rise in 2017, according to the council, with the 2017 projection a sharp increase on the previous one of 1.4 percent. There is set to be a budget surplus of $36.4 billion (€31.3bn) this year, a whole one percent of GDP and the highest since reunification.
The report pointed at strong private consumption, private and public investment – particularly in equipment and R&D – and the steady recovery of the Eurozone as a whole benefitting Germany as an export-oriented economy, as the primary reasons for the optimistic forecast.
Businesses also have reason for optimism, as the German business climate index from Munich’s Ifo Institute reached a monthly record of 116.7 points in October.
“The solid economic situation provides an ideal opportunity to re-adjust economic policy in order to prepare Germany for the challenges of the future,” said the GCEE Chair, Christoph M. Schmidt.
Among the recommended adjustments were suggestions geared towards making the growth more sustainable, including maintenance of budget surplus, improved labor laws to further enhance work-life balance, and further loosening of regulations hindering innovation and accelerated movement into digital change.
“The GCEE report is significant in that it marks out Germany’s economy as a place for manufacturing, research and innovation,” said Dr. Jürgen Friedrich, CEO, Germany Trade & Invest. “Our export economy continues to be a pillar of strength, also helping us develop further as the premier manufacturing location within the Eurozone economy of 500 million people. Meanwhile, the strong investment in R&D noted by this report is a sign that we are not only concerned with the current bottom line, but also future ones.”
Germany Trade & Invest is the foreign trade and inward investment agency of the Federal Republic of Germany. The organization advises foreign companies looking to expand their business activities in the German market. It provides information on foreign trade to German companies that seek to enter into foreign markets.