Joint Economic Forecast: A Strong Upswing Thanks to Cheap Oil and a Weak Euro

The German economy is experiencing a strong upswing. It is being stimulated by unexpected expansive impulses, especially the falling oil price and the sharp depreciation of the euro. Gross domestic product is expected to increase by 2.1 percent this year. Consumption is the driving force behind the upturn. The rest of the euro area is also expected to produce slightly positive impulses, meaning that international trade will contribute to growth. The pace of growth is only expected to slow slightly in the year ahead. The euro's depreciation will continue to stimulate the economy, while the positive effects of the lower oil price are expected to fade. Public budgets will show significant surpluses of over 20 billion € in 2015 and 2016, respectively. In view of large structural surpluses, the time is ripe to make the income tax rate more performance-oriented – especially for small and medium-sized companies.