Political uncertainty is not an issue in Germany, according to Moody’s analysts, who reported that the country’s economy will not be affected by the September 2017 parliamentary elections. Instead, near-term shocks are expected to be met with “high resilience” since Germany’s growth is broad-based and domestically driven.
In a Jan. 23 report, Moody’s said they expect a 2% growth in Germany’s economy in 2018, with a slight dip to 1.7% in 2019.
“Germany enjoys high levels of investor confidence, highlighted by its safe haven status in times of crisis and reflected in its low funding costs,” Moody’s Assistant Vice President Heiko Peters said in his report.
The country’s fiscal surplus also expanded to 1.2% of GDP in 2017—a 0.4% increase over the prior year. If Moody’s predication is accurate, fiscal surpluses will stay above 1% of GDP through 2019.
That isn’t to say there aren’t risks. Moody’s said that a downturn in the global business cycle could impact German companies as well as any increase in protectionism. Demographic trends are also believed to slow Germany’s growth in the medium to long term.
“Pressure could develop on Germany's creditworthiness if the country experienced a material and prolonged decline in the size and wealth of its economy, if it fails to address rising demographic pressures in the coming decades,” Moody’s said. “The rating could also come under pressure if government debt increases sharply and is unlikely to be reversed.”
—Andrew Michaels, editorial associate