At the end of 2018, the German economy is still on the upswing. Compared with the summer, however, the overall economic picture has deteriorated. Due to global uncertainties and domestic factors, the BVR has revised its forecasts downwards.

For the coming year, the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) expects economic growth of 1.7 per cent. Thus, the forecast is 0.1 percentage points below the summer forecast. In a recent press release, BVR board member Dr. Andreas Martin commented: “The German economy is still on the upswing, but the overall economic picture has deteriorated further compared to the summer.”

Economy burdened by many factors

Martin continues: “The continuing high level of global uncertainty, which results, among other things, from the smouldering trade conflicts and the unclear consequences of the Brexit and the Italian budget dispute, is weighing on the economy. Another factor is the high level of debt in the emerging markets. In addition, there are domestic aspects, such as the increasing shortage of materials and personnel, as well as the car registration backlog and the weak foreign trade development in the third quarter.”

Damper on GDP due to passenger car registration backlog

According to BVR estimates, the passenger car registration backlog caused by the new international WLTP emissions regulations reduced the GDP development rate by around 0.4 percentage points. In the third quarter of 2018, gross domestic product (GDP) in Germany, adjusted for prices, calendars and seasons, fell by 0.2 percent compared with the previous quarter.

BVR expects rising private consumption in 2019

The weakening of private consumption can most probably be attributed to higher energy prices. However, indicators such as the GfK consumer climate indicate that this will be overcome in the fourth quarter. Private consumption is forecast to grow significantly in 2019. This is due to increasing transfers, such as the increase in child benefit or the maternal pension II.

Positive economic forecast despite economic risks

For the last quarter of this year and the first quarter of 2019, estimates suggest economic growth of 0.5 percent again. This is indicated above all by the continuing good business climate. On the other hand, there are economic risks, which are primarily due to political factors. If, for example, new US tariffs are introduced in the automotive industry, this could lead to a significant reduction in German economic growth.

Export business is expected to increase in 2019. This will be somewhat stronger than in the current year, but not as dynamic as in 2017.

 

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Link: New BVR economic forecast published

Image: iStock

//CF