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Upturn Loses Momentum

Summary:
Press release with Key Forecast Figures (PDF, 75 KB) Germany’s leading economics research institutes have downwardly revised their forecasts for 2018 and 2019. They now expect economic output to increase by 1.7 percent in 2018, and not 2.2 percent as forecast in spring. They also scaled back their 2019 forecast slightly from 2.0 to 1.9 percent. These are the results of the Joint Economic Forecast for autumn 2018 that will be presented in Berlin on Thursday. “The upturn in the German economy is losing momentum. Demand from abroad has weakened, and companies are apparently suffering from labour shortages in production too,” explains Roland Döhrn, Head of Economic Forecasting at RWI – Leibniz Institute for

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Germany’s leading economics research institutes have downwardly revised their forecasts for 2018 and 2019. They now expect economic output to increase by 1.7 percent in 2018, and not 2.2 percent as forecast in spring. They also scaled back their 2019 forecast slightly from 2.0 to 1.9 percent. These are the results of the Joint Economic Forecast for autumn 2018 that will be presented in Berlin on Thursday.

“The upturn in the German economy is losing momentum. Demand from abroad has weakened, and companies are apparently suffering from labour shortages in production too,” explains Roland Döhrn, Head of Economic Forecasting at RWI – Leibniz Institute for Economic Research, which coordinated this autumn’s report. Commenting on the German government’s economic policy, he added: “Short-term initiatives like the family home-owner allowance tend to lead to windfall effects and rising costs because capacity utilisation in the construction industry is already high. In the current economic climate we need a housing policy that is geared more towards continuity.”

Upturn Loses Momentum

The number of persons in employment will rise from 44.9 million this year to 45.3 million next year and 45.6 million in 2020. At the same time, the number of registered unemployed persons will decline from 2.3 million this year to 2.2 million in 2019 and 2.1 million in 2020. This will bring the unemployment rate down from 5.2 percent this year to 4.8 percent in 2019 and 4.5 percent in 2020. Inflation in consumer prices will rise from an average of 1.8 percent this year to 2 percent in 2019, before dipping back down to 1.9 percent in 2020. Pressure from domestic prices will increase.

The institutes expect significant fiscal surpluses over the entire forecasting horizon. The surplus will hit a new record high of 54 billion euros this year. By 2020 the fiscal balance will melt down to 41 billion euros due to the government’s expansionary fiscal policy stance.

The risks for the German and international economic have grown since spring. At a global level this is mainly due to the rising number of trade conflicts, while the main risks at a European level are the possibility of Britain’s disorderly exit from the EU and the potential outbreak of a debt crisis in Italy.

The Joint Economic Forecast was prepared by RWI (Essen), DIW (Berlin), the ifo Institute (Munich), IfW (Kiel) and IWH (Halle).

About the Joint Economic Forecast

The Joint Economic Forecast is published twice a year on behalf of the German Federal Ministry for Economic Affairs and Energy. The following institutes participated in the autumn report 2018:

  • German Institute for Economic Research (DIW Berlin)
  • ifo Institute - Leibniz Institute for Economic Research at the University of Munich in cooperation with the Swiss Institute for Business Cycle Research (KOF) at ETH Zurich
  • Institute for the World Economy Kiel (IfW)
  • Leibniz Institute for Economic Research Halle (IWH)
  • RWI – Leibniz Institute for Economic Research in cooperation with the Institute for Advanced Studies Vienna

Scientific contacts

Dr. Claus Michelsen
German Institute for Economic Research (DIW Berlin)
Tel +49 30 89789 458
[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
Institute for the World Economy Kiel (IfW Kiel)
Tel +49 341 8814 579 or +49 30 2067 9664
[email protected]

Professor Dr. Oliver Holtemöller
Leibniz Institute for Economic Research Halle (IWH)
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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