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Germany Business Forecast Report Q4 2012

710.78

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Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£710.78

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Market

All Sectors

Report Type

Country Guide

Country

Germany

Published

24 October 2012

Number of Pages

47

Report Delivery

Download

Delivery Lead Time

Immediate

Publisher

Business Monitor International

File Format

PDF

Germanys economic outlook remains clouded by the continued risk of a eurozone break-up, which would lead to an immediate collapse in fixed investment and hit external demand for German exports very hard. Even with this scenario remaining outside of our baseline view, uncertainty over the ongoing eurozone crisis will keep business and consumer confidence levels subdued, thus hurting investment. Germanys government remains on track to reduce its net borrowing requirements and achieve a balanced budget under the Maastricht criteria by 2014. Low borrowing costs and strict adherence to the constitutionally mandated debt brake will keep the governments deficit reduction plan on track.

The formation of a majority government by the Social Democrats and the Greens in Germanys most populous state of North Rhine- Westphalia will embolden the opposition nationally, and place Chancellor Angela Merkel and her Christian Democratic Union on the defensive. That said, although we see scope for a considerable shake-up in policy and personnel at party headquarters in Berlin, we do not view the state election as a major threat to the chancellors chances in next years general election.

Major Forecast Changes

We have raised our 2012 real GDP growth forecast from 0.4% to 0.7% on account of adjustments to our net exports of goods and services projections, as we now expect export growth to outpace import growth. However, we have lowered our 2013 real GDP growth forecast from 2.0% to 1.5% and forecast 1.9% growth in 2014, a downward revision from our previous forecast for 2.1% real GDP growth.

We have raised our trade in goods surplus and, by extension, our current account surplus forecasts for Germany over the coming years on account of downward revisions to goods import growth. We now see the trade in goods surplus climbing to 6.3% of GDP in 2012, up from our previous projection for a 5.6% of GDP surplus. We now see the current account surplus coming in at 5.6% of GDP in 2012, up from our previous forecast of 4.9%.

Key Risks To Outlook

Medium-term risks to growth are weighted to the downside, as a eurozone break-up scenario remains a real risk in light of ever-growing banking sector recapitalisation requirements in Spain and prohibitive government bond yields suggesting that both the Spanish and the Italian governments will struggle to maintain access to international capital markets. In the absence of political cohesion and resolve to address the structural shortcomings of the eurozone, we believe that any short-term measures designed to address the crisis will prove little more than temporary stopgaps, weighing on household and business sentiment and, in turn, placing downside pressure on Germanys growth outlook.

We note that the biggest risk to Germanys public finances in the medium term is that the governments resistance to eurozone bailout measures could end up being far costlier than currently budgeted for. Should eurozone rescue measures suffer as a result of fiscal consolidation in Germany, this could end up being far costlier for the federal government on account of prospective banking sector recapitalisation and possible nationalisation at home.

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Select License Type

Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£710.78

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