FORECAST

Future overall economic development

 

The economic recovery in the eurozone remains crisis-prone. Indeed, the economic experts at FERI expect the exogenous driving forces of moderate growth, such as low energy prices and a weak euro, to lose their effectiveness and domestic growth stimulus to remain weak. Although a monetary policy geared towards continuous expansion will secure moderate growth in 2016, this growth will likely be characterised by reduced dynamics over the course of the year.

 

Moderate growth anticipated in Germany

For Germany, FERI believes that the economic dynamics are likely to remain weak albeit positive. The economy continues to rely on strong domestic demand on the basis of good employment market developments and discernible salary increases, accompanied by very low inflation rates. In the short-term, domestic demand will also be boosted by the need to provide subsistence for around one million migrants in 2015 and further asylum seekers in 2016. The rather muted export prospects with regard to the emerging economies and the US represent a risk of reduced growth dynamics.

On the basis of the aforementioned framework conditions, FERI anticipates eurozone growth of 1.5% for 2016 and 1.7% for 2017. In their forecast for Germany, the economic experts are predicting growth of 1.5% for 2016 and 1.9% for 2017.

 

Unemployment remains low

Based on estimates of the Institute for Employment Research of the German Federal Employment Agency (IAB), the employment market in Germany will continue to display robust development. In terms of the annual average for 2016, the IAB is forecasting a slight increase of 70,000 unemployed persons to a total of 2.87 million. The immigration of refugees will play a part here, although the effects of this cannot currently be accurately estimated. The labour requirements of companies remain high and the number of redundancies low. The employment market experts at the IAB are therefore predicting an increase in total employment figures of around 250,000 persons in 2016. Overall the German employment market is in a good condition.

 

Increasing salaries and wages

In its autumn forecast, the German government stated that it expects net wages and salaries to increase by 2.4% per employee in 2016 and that private households in Germany will enjoy a 2.8% increase in disposable income. In connection with low price increases, the significant income gains observed are facilitating considerable rises in private consumption expenditure. According to a forecast published by the German government, price-adjusted expenditure is likely to increase by 1.8% in 2016. The consumption expenditure of private households therefore continues to represent the key pillar of growth in Germany.

 

Savings rate remains stable

The Insurance Markets Taskforce of the German Insurance Association (GDV) expects the savings rate to remain at the current level of 9.7% in 2016. The experts attribute the slight increase in the propensity to save observed among private households in the reporting year to growing uncertainty regarding the employment market situation as a result of the many refugees coming into the country. According to the German Federal Statistical Office, the savings rate is currently at 9.7%.