Increase in consumption helps Germany’s GDP to grow 1.9 percent

Increase in consumption helps Germany’s GDP to grow 1.9 percent

Hosting 1.1 million migrants in 2015 and 2016 has had the effect of a real recovery plan on the German economy. Suggested by economists at year end, this hypothesis has been widely confirmed, Thursday, January 12, by the federal Institute for statistics of Destatis.

The growth of the German economy, which amounts to 1.9% in 2016, is more than half a percentage to the average of the previous decade (1.4%). The increase in expenditures of the State and the overall increase in consumption related to the arrival of the refugees have had on the economy a strong ripple effect. The State was the main actor in this phenomenon: to accommodate emergency one million poor people, he spent as rarely in thehistory of the country. Twenty billion euros was spent on hospitality and care of refugees in 2016. Accordingly, government spending rose by 4.2%. Such an increase had not been seen “since 1992, just after the reunification of the country”, noted Thursday morning Dieter Sarreither, Destatis president.

The sudden rise of the population also stimulated the consumption of households (+ 2%). In total, private and public consumption rose by 2.5%, which represented the biggest support to German growth in 2016. Apart from consumption, investment in capital goods and construction were the other drivers of activity. And their good performance also owes much to the arrival of the refugees. These, by increasing real estate demand in urban centers, have stimulated the construction of new housing. It jumped 4.3% last year, when investment increased 2.5%.

The contribution of foreign trade on the other hand had a small negative effect on growth (-0.1%), as imports rose faster than exports. In other words, the strong growth registered byGermany in 2016 has little to the traditional forces of the German economy, but much to domestic spending strongly stimulated by the arrival of the refugees.

Marcel Fratzscher, president of the Economic Institute of Berlin, estimated 0.3% the impact of refugees on the growth in 2016. “The positive effect of the asylum seekers on the country’s economic performance will to strengthen in the coming years ‘, he believes. It considers that long term “integration may increase the growth of 0.7%”. Meanwhile, the newcomers have already offset the effects of the German population decline this year, noted experts of Destatis.

There is no doubt that these elements will contribute to renew the debate on refugees in Germany, which until now was mainly addressed from the perspective of costs, or security. But two numbers are striking: the 20 billion euros spent by the State to accommodate asylum-seekers almost exactly match the surplus State in 2016, amounting to EUR 19.2 billion.

Remains the delicate question of whether the economy will be able to integrate newcomers. For now, only a few tens of thousands of refugees have found jobs. And, despite a strong demand for the companies, which are struggling to recruit. The Chamber of commerce andindustry table on the creation of half a million positions in 2017, mainly in health care and services in education and training, who plan to create 150,000 jobs this year, but also trade and gastronomy.

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