German Economy to Gain Additional Momentum in 2016

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The German economy is forecast to beat government growth expectations in 2016, according to new analysis from IHS Inc. (NYSE:IHS), the leading global source of critical information and insight.

Headline growth in real gross domestic product (GDP) is expected to be 2.1 percent this year, up from 1.7 percent in 2015, exceeding the German government’s official forecast of 1.8 percent. Accelerating growth is expected despite the restraining impact of weakness or outright recessions in a number of emerging markets because German domestic demand is likely to be firing on all cylinders in 2016.

Exports will be more resilient than generally expected

“Although the economic slowdown in China and recessions in large emerging markets such as Russia and Brazil will certainly leave their mark on global trade in general and German exports in particular, there are offsetting factors,” said Timo Klein, IHS Global Insight economist. “Among these factors are healthier U.S. and U.K. economies and a gradually strengthening Eurozone that is recovering from the debt crisis that dominated developments during the first half of the decade. Two-thirds of German exports go to either other EU countries or the U.S.”

Furthermore, the fairly weak stance of the euro, which is closely linked to an extremely soft monetary policy from the European Central Bank (ECB), is expected to enable German exporters to gain market share in trade with non-Eurozone countries.

Nevertheless, growth in imports is seen to outperform that in exports, leading to a modest negative contribution of net exports to GDP growth. Import strength reflects the expected robustness of domestic demand, which will also boost purchases of goods from abroad.

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