IFO economic institute out with their latest forecasts

  • GDP 2016 forecast raised to +1.9% vs 1.85 June
  • higher debt-financed state spending on refugees will lead to a temporary boost in demand

Says IFO:

The modest upturn seen in the German economy for some time is expected to continue. Real gross domestic product will increase by 1.7% this year, and by 1.9% in 2016. The growth rate is subsequently expected to fall to 1.7% in 2017. Private consumption will continue to drive the upswing, which will be boosted by a renewed drop in oil prices, higher earnings and transfers and a lighter tax and social charges burden on households. In addition, expansive stimuli from fiscal and social policy will be stronger, not least due to far higher government expenditure on consumption and transfers related to the influx of refugees.

While construction investment is expected to grow sharply over the forecasting period, equipment investment will only see a modest increase, despite favourable financing conditions. Since imports are expected to rise more than exports due to forecasts of strong domestic demand, there will be almost no stimuli from foreign trade.

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