German economy defies slowdown

GDP expands by 1.7% in 2015

BERLIN: The German economy, Europe’s biggest, shrugged off the Greek crisis, the economic slowdown in China and geopolitical uncertainties to notch up “solid and consistent growth” in 2015, the Federal Statistical Office (Destatis) said yesterday.

“With interest rates, inflation and unemployment all around record low levels, domestic demand has become the main growth driver,’’ analysts said.

“And in the short term at least, the massive inflow of more than one million asylum seekers into the country will boost demand further this year,’’ they predicted.

According to a preliminary estimate by Destatis, German gross domestic product (GDP) expanded by 1.7% in 2015, fractionally faster than the 1.6% recorded in 2014.

At the same time, Germany clocked up a surplus on its public budget of €16.4 billion ($17.9 billion), equivalent to 0.5% of GDP and the second year in a row that Germany’s public finances have been firmly in the black, the office said.

Euro zone countries are not allowed to run up deficits in excess of 3.0% of GDP and must aim for a balanced budget for even a surplus in the longer-term.

“The economic situation in Germany in 2015 was characterised by solid and consistent growth,” said Destatis president Dieter Sarreither. “Almost all industrial sectors saw growth.”

And the increase in economic activity was driven primarily by domestic demand, he added. “Consumption was the most important growth engine in the Germany economy. Investment and foreign trade helped support the positive trend, too, but to a much smaller extent.”

Among the different GDP components, private consumption was up 1.9% in 2015 and government spending grew by 2.8%; investment in machinery and equipment advanced by 3.6%; exports were up 5.4% and imports expanded by 5.7%.

In concrete terms, GDP amounted to €3.027 trillion in 2015, the first time ever that it has topped the three-trillion mark, and it was generated by more than 43 million people in employment, the highest level since unification in 1990, Destatis said.

The statisticians did not provide any precise growth figures for the fourth quarter alone, which are not scheduled to be released until February 12.

But in a very rough estimate, Destatis said it was pencilling in growth of “about a quarter of a percent” for the last three months of 2015, compared with 0.3% in the preceding quarter. Economists welcomed the overall data. “2015 was the year... in which the German economy, despite many headwinds like the Greek crisis, t he slowdown i n emerging markets and China and increased geopolitical uncertainties, continued its recovery,” said ING DiBa economist Carsten Brzeski.

“Looking ahead, the two-speeded recovery, with strong consumption and services on the one hand and sluggish industrial production and exports on the other hand, should continue in 2016,” the expert continued.

Consumption should receive a boost from the record influx of refugees, at least in the short term, the analyst argued.

At the same time, low interest rates, low inflation and high employment should also boost growth.

BayernLB economist Stefan Kipar was similarly confident.

“We’re projecting a continuation of the moderate growth trend this year, as well,” he said, forecasting annual average growth of 1.8%.

UniCredit economist Andreas Rees said that “going forward, we think that there is more to come both in terms of private and public consumer expenditures. We expect GDP growth of ‘about’ 2% for this year.”

Berenberg Bank economist Holger Schmieding was also optimistic.

“With a fiscal stimulus of at least 0.5% due mostly to extra spending on refugees, Germany may even manage to marginally surpass the (growth) for 2015, despite likely declines in exports to China and to some other emerging markets.”