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Joint Economic Forecast Spring 2017: Upturn in Germany strengthens in spite of global economic risks

Summary:
Apr 12, 2017 The German economy is already in the fifth year of a moderate upturn. According to the Gemeinschaftsdiagnose (GD, joint economic forecast) that was prepared by Germany’s five leading economic research institutes on behalf of the Federal Government, capacity utilization is gradually increasing, and aggregate production capacities are now likely to have slightly exceeded their normal utilisation levels. However, cyclical dynamics remain low compared to earlier periods of recoveries, as consumption expenditures, which do not exhibit strong fluctuations, have been the main driving force so far. In addition, net migration increases potential output, counteracting a stronger capacity tightening. “Gross domestic product (GDP) is expected to expand by 1.5 % (1.8 % adjusted for calendar effects) and 1.8 % in the next year. Unemployment is expected to fall to 6.1 % in 2016, to 5.7 % in 2017 and 5.4 % in 2018”, says Oliver Holtemöller, Head of the Department Macroeconomics and vice president of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association. Inflation is expected to increase markedly over the forecast horizon. After an increase in consumer prices of only 0.5 % in 2016, the inflation rate is expected to rise to 1.8 % in 2017 and 1.7 % in 2018.

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Apr 12, 2017

The German economy is already in the fifth year of a moderate upturn. According to the Gemeinschaftsdiagnose (GD, joint economic forecast) that was prepared by Germany’s five leading economic research institutes on behalf of the Federal Government, capacity utilization is gradually increasing, and aggregate production capacities are now likely to have slightly exceeded their normal utilisation levels. However, cyclical dynamics remain low compared to earlier periods of recoveries, as consumption expenditures, which do not exhibit strong fluctuations, have been the main driving force so far. In addition, net migration increases potential output, counteracting a stronger capacity tightening.

“Gross domestic product (GDP) is expected to expand by 1.5 % (1.8 % adjusted for calendar effects) and 1.8 % in the next year. Unemployment is expected to fall to 6.1 % in 2016, to 5.7 % in 2017 and 5.4 % in 2018”, says Oliver Holtemöller, Head of the Department Macroeconomics and vice president of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association. Inflation is expected to increase markedly over the forecast horizon. After an increase in consumer prices of only 0.5 % in 2016, the inflation rate is expected to rise to 1.8 % in 2017 and 1.7 % in 2018. The public budget surplus will reduce only modestly. Public finances are slightly stimulating economic activity in the current year and are cyclically neutral in the year ahead.

About the Joint Economic Forecast

The Joint Economic Forecast is published twice a year in spring and in autumn on behalf of the Federal Ministry for Economic Affairs and Energy. The Joint Economic Forecast in spring 2017 was prepared by DIW Berlin, ifo Institute, IfW, IWH, and RWI.

Scientific contacts

Dr Ferdinand Fichtner
German Institute for Economic Research (DIW Berlin)
Tel +49 30 89789 248
[email protected]

Professor Dr Timo Wollmershäuser
ifo Institute – Leibniz Institute for Economic Research at the University of Munich
Tel +49 89 9224 1406
[email protected]

Professor Dr Stefan Kooths
Kiel Institute for the World Economy (IfW)
Tel +49 341 8814 579 or +49 30 2067 9664
[email protected]

Professor Dr Oliver Holtemöller
Halle Institute for Economic Research (IWH) – Member of the Leibniz Association
Tel +49 345 7753 800
[email protected]

Professor Dr Roland Döhrn
RWI Leibniz Institute for Economic Research
Tel +49 201 8149 262
[email protected]

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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