Joint Diagnosis Germany Spring 2016: Upswing Rmains Moderate – Economic Policy Less Growth-oriented

The German economy is experiencing a moderate upswing. Gross domestic product is expected to rise by 1.6 percent in 2016 and 1.5 percent in 2017. The upturn is being driven by private consumption, which is benefiting from the ongoing increase in employment, the noticeable increases in wage and transfer incomes and the gains in purchasing power from energy prices. In addition, fiscal policy is expansive, partly because of the increasing expenditure on coping with refugee migration. While construction investments are also expanding noticeably, corporate investment activity remains subdued. Due to the only gradual recovery of the global economy and strong domestic demand, foreign trade is not expected to provide a positive economic stimulus. Public households should generate significant surpluses in the forecast period. If, as in previous years, this room for manoeuvre were to be used in a less growth-oriented manner, this would not be sustainable.