Germany economy will slow only moderately this year and next - KfW Research

Chief Economist of KfW Dr Jörg Zeuner notes that the underlying cyclical momentum in Germany will slow only moderately this year and next. KfW Research expects Germany economy to show real growth of 1.4 percent for 2017 (previous forecast: 1.3 percent). The initial growth forecast for Germany in 2018 is 1.4 percent as well.

However, the political environment poses considerable risks to the forecast. Should the USA and the UK as important partners in trade and direct investment strictly follow through with their isolationist plans, while the centrifugal forces in continental Europe continue to increase, growth could turn out considerably lower than expected, particularly in 2018.

On the flipside, a positive surprise is also possible if political risks are reduced and businesses consequently abandon their wait-and-see attitude and substantially expand investments.  If these risks dissipate, growth may turn out significantly higher once the investment backlog is eliminated, notes Kfw.