Economic Affairs Minister Peter Altmaier said: “The economic development in Germany has slowed down since the middle of last year. The good news is that we are set to overcome this period of weakness. The Federal Government is expecting GDP to grow by 0.5% this year and by 1.5% next year. The labour market is developing positively, as are wages; the cuts in taxes and charges are resulting in rising incomes. We are investing record amounts in infrastructure, education and research and are focusing on forward-looking technologies such as artificial intelligence. Nevertheless, the current sluggishness in the German economy must serve as a warning. I am therefore working to improve the competitive conditions and tax environment for our companies, to keep our welfare spending below 40% in the long term, to encourage other ministries to make clear contributions towards cutting red tape, and to quickly introduce tax breaks for spending on research. We should not lose any time before we do this.”
2019 is starting from a low base because of the special problems relating to the new WLTP tests for car emissions and the low water levels in the Rhine last year. The softening of the global economy due to the trade conflicts and the Brexit process is also having a negative impact. However, important domestic forces for growth are intact: In tandem with higher wages and cuts in taxes and charges, the positive development on the labour market is resulting in a clear rise in personal disposable income. This lays the foundation for dynamic consumer demand. The construction industry is booming, and the implementation of the coalition agreement is delivering a further boost. The domestic economy is continuing to drive the German economy. The encouraging development on the labour market is continuing. Employment is likely to rise to an all-time high of nearly 45 ¾ million people by 2020. At the same time, the unemployment rate will fall to an all-time low of 4.6%. However, the rise in employment and drop in unemployment will slow down to some extent.
Further details of the projection:
- The international organisations are correcting their growth forecasts downwards. However, the global economy is likely to pick up some speed in the reference period. Exports of goods and services from Germany are initially expected to see relatively moderate growth.
- Imports will increase more significantly due to strong domestic demand. In purely arithmetical terms, therefore, foreign trade is expected to make a clearly negative contribution to growth in 2019.
- The current account surplus is continuing to fall, and will drop to 6.4% by 2020.
- German companies will invest less in plant and machinery than last year. However, their spending on investment will continue to point upwards in view of a high level of capacity utilisation.
- Investment in construction will remain brisk as demand stays high and interest rates stay low. Public-sector investment is also being increased significantly in both this and next year. However, the construction sector is increasingly having to cope with capacity bottlenecks, which are also reflected in rising prices for building work.
- The public sector is providing a powerful cyclical stimulus as it implements the coalition agreements.
- Due to the slower economy and relatively low crude oil prices, the rate of inflation will fall this year to 1.5% (2020: +1.8%).
The key macroeconomic figures contained in the spring projection form the basis for the tax revenue forecast, which will be compiled in Kiel on 7-9 May 2019. These figures provide a general framework for drafting the budgets of the Federal Government, the Länder, municipalities and social insurance funds.
Key figures from the 2019 spring projection
|Use of GDP volumes||2018||2019||2020|
|Changes against previous year|
|Gross Domestic Product (volume)||1.4||0.5||1.5|
|Private consumption expenditure||1.0||1.2||1.6|
|Public consumption expenditure||1.0||2.0||1.8|
|Gross fixed capital formation||2.6||2.2||2.8|
|Machinery and Equipment||4.2||2.0||3.0|
|Prices (2010 = 100)|
|Private Consumption Expenditures||1.6||1.4||1.7|
|Gross Domestic Product||1.9||2.3||2.0|
|Consumer Price Index||1.8||1.5||1.8|
|in mio. persons|
|Unemployment (Federal Employment Agency definition)||2.34||2.20||2.11|