2013-12-09 12:22:10 - Recently published research from Business Monitor International, "Germany Business Forecast Report Q1 2014", is now available at Fast Market Research
We remain slightly above consensus on German real GDP growth in 2014, as we expect the incipient recovery to continue over the next few quarters.
We still believe a grand coalition between Germany's centre-right Christian Democrats (CDU-CSU) and the centre-left Social Demo -cratic Party (SPD) remains the most likely outcome following the September 2013 general election. Under such a government we would expect slightly less focus on fiscal austerity both at home and for periphery eurozone states, although the change from current policy trajectory would be modest.
We believe Germany's current account surplus has peaked in 2013, and is set to narrow over the next few years as exports to Asia are hit by China's painful economic rebalancing, and imports rise in
line with a strong private consumption story.
Major Forecast changes
We have made no major changes to our forecasts this quarter, as we await the outcome of ongoing coalition negotiations for a clearer picture of the next government's policy trajectory.
Full Report Details at
- www.fastmr.com/prod/751971_germany_business_forecast_report_q1_2 ..
Key risks to outlook
Our core scenario envisages only modest shifts in policy trajectory under the next government. However, there is a chance that fiscal policy becomes looser than we currently expect, which would pose an upside risk to our growth forecast. However, this also prompts us to revise our fiscal and debt forecasts, as it would likely push back the previous government's ambitious consolidation agenda.
External (particularly Chinese) demand and the euro trajectory pose significant threats to Germany's external account and net export outlook. Our view is for a moderation in demand from China and a slight unwinding of euro strength over the course of 2014, which combined with steadily rising real incomes will lead to a modera -tion in export growth over the next few quarters. If the euro proves stronger than we currently anticipate and/or Chinese demand falls by more than currently expected, this could see Germany's current account surplus narrow at a much more rapid pace than we currently expect, hurting growth in the process.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
election result: Grand coalition still Likely
- Our expectations of a grand coalition between the centre-right Christian Democrats and centre-left Social Democrats have been reinforced by the results of Germany's September 22 federal election.
Long- term political outlook
Difficult Decisions Ahead
- Although it is one of the most stable countries in the world, Germany must make some difficult political choices over the next 10
chapter 2: economic outlook
BMi economic risk ratings
recovery on track
- German domestic demand will continue recovering through 2014, despite the weak outlook for German exporters. While the euro's trajectory and Chinese demand pose significant risks to growth, we view the outcome of the September 22 federal elections as a net positive for consumption and investment.
taBLe: econoMic actiVit Y
Balance of payments
current account surplus Has peaked
- Germany's current account surplus looks to have peaked in Q213, with stronger domestic demand and weaker exports set to drive a narrowing of the surplus over the next few years.
no Fiscal Fallout under new Government
- Despite pushing for looser fiscal policy in ongoing coalition negotiations, Germany's Social Democrats (SPD) will not be able to persuade Chancellor Angela Merkel to significantly alter ambitious deficit and debt reduction goals.
taBLe: spD's 10 " non- neGotiaBLe" points
exchange rate policy
Beware of Volatility Blowback
- Despite efforts by the European Central Bank to quash volatility in the eurozone by eradicating left tail risk (there is now surprisingly little talk of a euro breakup), we warn of the possibility of a major blowback in 2014. .
taBLe: Fisca L poLicY
commercial Banks struggling to compete
regional Banking sector
Banking: the state of the union
- A new era beckons for eurozone banking as the European Central Bank is due to take over supervision of national credit institutions in 2014, which will herald the next stage of economic integration.
chapter 3: 10-Year Forecast
the German economy to 2022
economy Losing its shine
- Germany 's economic prowess is set to fade over the next decade, as productivity gains are harder to come by and an aging population translates into slower real GDP growth. Nevertheless, the overall picture will remain one of relative economic stability, as increased domestic consumption replaces exports as a key driver of economic activity.
chapter 4: Business environment
BMi Business environment risk ratings
Business environment outlook
taBLe: BMi Business anD operation risK ratinGs
taBLe: BMi L eGaL FraMeWorK ratinG
taBLe: LaBour F orce QuaLit Y
taBLe: traDe anD inVest Ment ratinGs
chapter 5: Key sectors
taBLe: construction anD inFrastructure inDustrY Data, 2010-2016
Full Table of Contents is available at:
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