German Economic outlook 2015


The German economy is set to grow far slower in the next year than previously anticipated: KfW Research has cut its economic forecast for 2015 by half to 0.8% and revises its 2014 expectations downwards slightly once again just before the close of the year to 1.4%. The previous forecasts were 1.5% (2015) and 1.6% (2014; all figures adjusted for calendar effects).

“The economic momentum in Germany has come to a near standstill since the heavy slowdown in spring. It is hardly realistic to expect anything more than stagnation, and this will last into the new year,” states Dr Jörg Zeuner, Chief Economist of KfW Group. He reasons that the prolonged phase of weakness is due to the many geopolitical risks but, above all, to the fact that hopes of a recovery in Europe have been thwarted again and again. “This weighs not only on German export growth, but also causes companies to massively hold back investments as they are becoming increasingly concerned because of the difficult general international conditions,” Zeuner adds. According to him, the situation will take some time to normalise. The labour market, private consumption and housing construction, in turn, continue to support the German economy.

The recovery of corporate investment that had given rise to hopes in spring 2013 has died down for the time being after the second decline in a row (-0.9% QoQ in Q3, following -0.7% in Q2). KfW Research nevertheless expects a 3.5% increase in real corporate investment in the full year 2014, which, however, will be owed exclusively to the extremely strong Q1 and the after effects of the momentum seen in 2013 (statistical carry-over effect). The investment recovery that ended so abruptly in the course of 2014 will have an effect on the average annual rate in 2015; due to the low starting level and the economic power that should still be lacking, especially in the winter half-year, corporate investment is likely to grow only very slowly by about 0.5% in the next year (adjusted for calendar effects).

In the assessment of KfW Research, an economically weak winter half-year can hardly be avoided at this stage. This view is also supported by the company expectations that have fallen considerably since the beginning of 2014. However, the situation could well improve in the course of 2015, provided the relations with Russia stabilise and Europe shows at least some degree of upturn. Given the likelihood of a weak winter half-year and the resulting sluggish start into the year, only 0.8% real growth is achievable in the full year 2015 (not adjusted for calendar effects: 1.0%).

The eurozone, being the most important export destination for the German economy, will deliver only weak impulses this year and in the year to come: KfW Research forecasts 1.0% growth in 2015, up from 0.7% this year. “A real economic upturn looks different,” Zeuner says. “But unemployment in Europe is still too high, the fiscal policy too pro-cyclical and the overall conditions are much too uncertain for the companies.”

A video statement of KfW Chief Economist Dr Jörg Zeuner on the economic forecasts for Germany and the eurozone is available at: (only in german language)