Germany's GDP likely to see 1.6% growth in 2016

There might be increase of German government spending in 2015 and 2016 due to the strong inflow of asylum seekers. According to the latest quasi-official estimates the government now expects an inflow of 1m people. 

The political will is to fund these unexpected expenses at least to a large degree not by cutting other expenditure but by letting the expected budget surplus shrink. Other things equal, aggregate demand in the economy rises, because fiscal policy gets more expansionary.

On the external side, goods exports, imports and the trade surplus are set to reach new record-highs this year. Demand from the Euro area is strengthening while exports to countries outside Europe get support from the weaker EUR. 

Exports to Russia have collapsed, but Russia does not play a major role for German exports any longer. Exports to China (6% of German exports) have barely grown in recent months.

"GDP growth of 1.6% is expected for this year and 1.8% for 2016. For 2017, a moderate slowdown is expected to 1.5% the 2017. This is due to a weaker external environment and a re-strengthening of the EUR", says Nordea Bank.