Economics Minister lowers forecast to 0.5 percent – why?

In line with expectations, Economics Minister Peter Altmaier has once again lowered his forecast for economic growth in 2019 – from 1.0 to 0.5 percent. The Federal Government is therefore positioning itself more sceptically in its economic outlook than the economic research institutes in their joint diagnosis published just under two weeks ago. In the report commissioned by the Ministry of Economics, the institutes are forecasting a growth rate of 0.8 percent for the current year in Germany.

This clear deviation from the cumulative and specially commissioned expertise of these economic think tanks is somewhat surprising. The reasons behind this may well be political, even though Minister Altmaier explicitly spoke out against a government stimulus package when presenting the forecast.

At all events, it is not easy comprehending the economic rationale of the new forecast. The first quarter, that is hugely important for the full-year forecast, is already behind us, but it will take another approx. four weeks for the Q1 growth rate to be published. In their report, the institutes estimate growth of 0.2 percent compared with the previous quarter. This does not seem all that optimistic, especially as the Bundesbank stated in its current monthly report early in the week that the German economy was likely to have grown „moderately“ in the last quarter. But if Mr Altmaier does not expect a worse Q1 result than the institutes, it looks as if he is more sceptical about the rest of the year.

This also seems difficult to comprehend at this juncture. There can be no doubt that German industry, in particular, has come under pressure due to the deceleration in global economic activity and world trade, and the order situation has also deteriorated. Nevertheless, there are increasing signs these days that this phase of weakness could soon be overcome. Growth in China, for example, remained robust in the first quarter, with industry surprising us particularly in March with a noticeable increase in production. The chances of a settlement being reached in the trade dispute with the United States also do not seem that bad. The uncertainty over Brexit is also likely to decline in importance for the time being, now that a postponement has been achieved.

In light of this, we therefore see no reason to revise down our growth forecast of 1.0 percent for the current year. Given the robust state of the domestic economy and the gradual improvement on the international arena, we believe that the German economy has good chances of reaching this rate in 2019.

 

 

Rate this article


Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *