Economic Optimism

German Investment to Boom in 2016

turbines at siemens_picture alliance
A worker in a Siemens turbine factory in Görlitz, eastern Germany. Demand for investment goods is projected to rise in 2016.
  • Why it matters

    Why it matters

    Germany was long criticised for focusing too much on saving and budget restraint, and not investing enough. That may be about to change, with economists predicting sharp rises in investment in 2016.

  • Facts

    Facts

    • German business plans to boost investment by 6 percent in 2016, according to a survey by the Munich-based Ifo institute.
    • Public inverstment will also rise 6 percent, according to a government-appointed panel of economic experts.
    • Ulrich Grillo, President of the Federation of German Industries, predicts the German economy should see about 2 percent growth this year. That would be its strongest performance since 2011.
    •  
  • Audio

    Audio

  • Pdf

One year ago, Germany faced calls to boost its sluggish corporate and public investment, with critics warning that bridges, roads and many public buildings were in urgent need of repair. The government was accused of being too focused on balancing its budget, and neglecting necessary investments as a result.

The government responded. In spring 2015, a panel of experts set up by Economics Minister Sigmar Gabriel presented a “10-point plan for more investment, growth and jobs.” To be sure, not much has happened since then. Even without the action plan, investments rose by 1.7 percent in the first quarter of 2015 from the previous quarter – only to fall slightly in the following two quarters.

It’s hard to predict and steer investments in a market economy. Investment decisions hinge on business expectations and can rapidly be changed by geopolitical events. It comes as no surprise that in light of the Greek crisis, China’s market turmoil and fears of terrorism, some investors shelved planned projects last year.

But there are good chances that investment will pick up again in 2016. According to a survey by the Munich based Ifo Institute, German business plans to boost investment by 6 percent in 2016.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.