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Germany Country Risk Report Q4 2018

Germany Country Risk Report Q4 2018

We are relatively optimistic about the German economy in 2018-2019, particularly in light of the recent acceleration in economic growth.

The rebalancing of the German economy towards greater levels of domestic consumption has been far slower than we initially expected.

The government will remain committed to a very conservative fiscal stance and will continue to push for this at the eurozone level as well.

German politics is entering a period of heightened instability, as the result of the September 24 federal election makes a three-party coalition the most likely outcome, with a Christian Democrat-Free Democrat-Green coalition likely to endure significant policy disagreements.

A strong result for the anti-immigrant Alternative for Germany highlights the major schisms created by the migrant crisis in Germany, with the country previously having eschewed nationalist parties entirely.

Strong revenue growth, containment of expenditure and low interest rates will continue to contribute to a lower general government debt load over time. There is increasing scope to commit more funds to growth-boosting infrastructure investments, but the window for such a policy shift may be closing.

Key Risks



Rising euroscepticism and political instability may spark a crisis in a weaker member state such as Italy, which would have negative implications on regional growth.

Headwinds posed by Brexit may prove more severe than anticipated, weighing in particular on Germany's crucial export sector.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Economic Headwinds Intensifying
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
TABLE: GDP GROWTH FORECASTS
External Trade And Investment Outlook
Exporters Under Pressure
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP FIVE IMPORT SOURCES AND GOODS IMPORTS (2016)
TABLE: TOP FIVE EXPORT DESTINATIONS AND GOODS EXPORTS (2016)
Monetary Policy
Inflation Likely To Soften
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES, 2015
Germany Country Risk Q4 2018ContentsCurrency Forecast
EUR: Strength Unlikely Despite Tighter Monetary Policy
TABLE: EUROZONE CURRENCY FORECAST
10-Year Forecast
The German Economy To 2027
Rebalancing To Play Out Slowly
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
CDU-CSU Spat Compounds Fragility Of German Government
Long-Term Political Outlook
Difficult Decisions Ahead
Global Macro Outlook
Fewer Negative Surprises, But Trade Risks Rising
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: GERMANY – MACROECONOMIC DATA AND FORECASTS

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