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Economic growth is projected to decline but remain solid, backed by strong job creation and a fiscal stimulus. Trade-related uncertainties and moderating world demand will weigh on exports. Private consumption will accelerate due to strong wage growth and fiscal measures that increase household disposable income. Low interest rates, high capacity utilisation and growing housing demand will support residential and business investment. The current account surplus will fall as stronger domestic demand fuels imports.
Strong cyclical revenue growth will keep the fiscal balance in surplus. Fiscal space should be used to increase spending on education, high-speed broadband and low-emission transport infrastructure, which would strengthen productivity growth and inclusiveness. Tax reductions for low-wage and second earners along with higher environmental and real estate taxes would promote greener and more inclusive growth. Strengthening lifelong learning would help workers cope with technological changes and prepare for the future of work.
1. The ratio of nominal house prices to nominal disposable income per head normalised by the long-run average since 1980.
Source: Ifo Business Survey, October 2018; and OECD, Analytical House Price database.
1. Population aged 15-74 years. Based on the German labour force survey.
2. Percentage of unfilled job vacancies relative to total employment.
3. Average nominal wage per employee.
4. Harmonised consumer price index (HICP). Core HICP excludes energy, food, alcohol and tobacco. Projection from 2018Q4 for HICP and core HICP.
Source: OECD Economic Outlook 104 database; and Statistisches Bundesamt.
Economic Survey of Germany (survey page)