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30.11.2016
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PANORAMA GERMAN ECONOMY IN 2017: STABLE, BUT NOT STAID

PANORAMA GERMAN ECONOMY IN 2017: STABLE, BUT NOT STAID

PANORAMA GERMAN ECONOMY IN 2017: STABLE, BUT NOT STAID
The signs for Germany’s further economic development are promising, with a high level of stability. Coface’s expectations for solid growth therefore come as little surprise. This year’s gross domestic product is expected to grow by 1.8 % (seasonally adjusted and corrected for working days). Growth for next year, at 1.7 %, will only be marginally smaller. Since 2015, Germany’s economy has been growing faster than the potential of 1 to 1.5 % set by the German Bundesbank and several research institutions.
The primary growth driver for 2017 will once again be private consumption, mainly fuelled by the country’s record-high levels of employment. Consumers’ purchasing intentions will gain additional impetus, although less so than in 2016, due to lower increases in real wages resulting from
rising inflation.
The main focus for 2017 will be on the political arena, with presidential elections in France and the Bundestag elections in autumn. The five federal state elections this year are considered important indicators for the upcoming federal elections and it can be expected that the future Federal Government – whatever its colour – will be less powerful than the current “Grand Coalition”. This will restrain reforms to a minimum level.

 

Risks for the German economy could also occur on the export side. Global trade is only expected to show moderate growth in 2017 and specific risks are lurking in some of the major target countries for German exports – such as the forthcoming Brexit and the cooling down of the Chinese and US economies. Insecurity could also rise in the aftermath of the US presidential elections. German exports will only grow by 2.3 % in 2016 and 3.4 % next year. In this environment, Coface forecasts that the downward pressure on insolvencies will continue, with the fifth year in a row of record lows in 2017 (falling to a volume of around 21,000). Nevertheless, this downward trend is expected to continue at a slightly slower pace. After decreasing by 5% this year, Coface forecasts a further decline in bankruptcies by 4.2 % in 2017. Despite the positive outlook, the amount of outstanding claims in insolvency procedures could rise further, as several sectors, especially large companies, are under increased pressure from competition, costs and profit margins.

 

GERMANY’S PARLIAMENTARY ELECTIONS IN 2017: THE NEXT GOVERNMENT WILL BE WEAKER THAN THE CURRENT ONE

 

The established forces are rapidly losing support in Germany’s federal state elections

 

2016 was a ’super election year’ with a total of five federal state elections. Amongst these were Baden-Wuerttemberg (Germany’s third largest federal state in terms of number of inhabitants), along with Rhineland-Palatinate, Berlin, Saxony-Anhalt and Mecklenburg-Western Pomerania (respectively the 7th, 8th, 11th and 14th largest). These elections mean that nearly 30 % of German citizens have been called to the polls. The results thus provide a comprehensive picture of the voter mood in advance of the upcoming federal elections next year

 

The resulting picture is almost unanimous. Amidst a distinctly higher voter turnout there was one big winner across the federal state boundaries: the ’Alternative für Deutschland (AfD)’ (Alternative for Germany). The AfD, with its right wing populist anti-immigration and Eurosceptic programme, achieved solid double-digit results from a standing position. Conversely, the country’s two main governing parties, the CDU and SPD, suffered heavy losses in almost all federal states, with sharp two-digit declines for both parties in Baden-Wuerttemberg. This means that in federal states such as Baden-Wuerttemberg and SaxonyAnhalt, the main parties have shrunk to such an extent that even a Grand Coalition could no longer attain a majority

 

Will the Grand Coalition come to an end in 2017?

 

The parties of the governing coalition are unlikely to escape unscathed during next year’s elections. According to current surveys, both the Union and SPD parties are scoring lower than the results they achieved during the last parliamentary elections (of September 2013). They are also below the survey results taken at the turn of the year 2015/2016.

 

Nevertheless, the overall picture for the future of the Federal Government reflects stability and anything other than a renewal of the Grand Coalition would be a surprise, as all available surveys still show that the Grand Coalition has a margin of security to obtain an absolute majority, while there is no majority for any other coalition of two parties. Even a tripartite alliance of the SPD, Left Party and The Greens, which has been sought by several groups, would have little chance of obtaining absolute majority.

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Leyla ZERGER SİDAL

İLETİŞİM VE PAZARLAMA
BÖLÜM BAŞKANI
TEL. : +90 (212) 385 99 60
leyla.zerger@coface.com

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