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Germany Business Forecast Report Q2 2010
Management Report
Published: February 2010
Pages: For full details, please email keithw@cmsinfo.com
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 480.00 Buy Now!
Research from: Business Monitor International
Sector: Regional Markets
Germany’s economy is set to bounce back from the 5.0% contraction in real GDP witnessed in2009 to see growth of 1.7% in 2010 according to BMI’s latest forecasts. We expect to see a morebalanced growth profile over the forecast period, with a stronger consumer and a weaker exportsector. Support for this improved growth profile will come from a broadly stable political sceneover the next three years as well as a world-class business environment. Over the longer term,however, we remain concerned over structural weaknesses in the political system, and risks tothe country’s skills base posed by a potential demographic timebomb.
The CDU is staying firmly on the centre ground of German politics, and is trying to avoid pressurefrom its political partners to pull to the right. We expect Chancellor Angela Merkel to maintain acentrist approach, though concessions will have to be made, potentially including tax cuts in 2010-2011. The political challenges facing Germany over the coming decade, however, are not so muchcentred around public policy, as trying to foster economic growth in east Germany, arresting (ormanaging) population decline and dealing with the potential implications of further EU integration.Overall, the political risk profile in Germany remains amongst the best in the world.
The German economy posted its worst post-World War II real GDP growth outturn in 2009, seeinga contraction of 5.0%. We expect real GDP growth to return this year, with a 1.7% expansion nowbeing forecast by BMI. Germany is set to slip from being the fourth to the sixth-largest economyglobally in nominal US$ terms over our 10-year forecast period, as a result of slow real GDPgrowth and a resurgent US dollar. Growth will be constrained by increasing global competition inGermany’s key capital export industries, the reticence of German consumers to spend money,and past governments shying away from market-friendly reforms.
Germany’s business environment remains strong by international standards. Communication linksare good, the workforce well educated and multilingual and the regulatory environment generallysupportive of the commercial and industrial sectors. However, the company tax regime, as wellas employment law, continue to be major impediments to Germany raising the pace of economicgrowth. Skills shortages could emerge in future years as the population ages, unless Germanybecomes increasingly open to importing labour from elsewhere in the EU and beyond.
The German economy posted its worst post-World War II real GDP growth outturn in 2009, seeinga contraction of 5.0%. We expect real GDP growth to return this year, with a 1.7% expansion nowbeing forecast by BMI. Germany is set to slip from being the fourth to the sixth-largest economyglobally in nominal US$ terms over our 10-year forecast period, as a result of slow real GDPgrowth and a resurgent US dollar. Growth will be constrained by increasing global competition inGermany’s key capital export industries, the reticence of German consumers to spend money,and past governments shying away from market-friendly reforms.
Germany’s business environment remains strong by international standards. Communication linksare good, the workforce well educated and multilingual and the regulatory environment generallysupportive of the commercial and industrial sectors. However, the company tax regime, as wellas employment law, continue to be major impediments to Germany raising the pace of economicgrowth. Skills shortages could emerge in future years as the population ages, unless Germanybecomes increasingly open to importing labour from elsewhere in the EU and beyond.