{ "title": "Germany: Staff Concluding Statement of the 2016 Article IV Mission", "publication": "IMF News, May 9, 2016", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs050916", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs050916", "overlayPath": "/en/news/articles/2015/09/28/04/52/mcs050916/index.md", "summary": "Describes the preliminary findings of IMF staff at the conclusion of certain missions (official staff visits, in most cases to member countries).", "publishDate": "2016-05-09", "sections": [ { "heading": "Mission purpose and context", "content": "- Concluding Statement describing preliminary findings of IMF staff at the end of an official staff visit (mission) undertaken as part of regular Article IV consultations.\n- The authorities consented to publication. Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.\n- FSAP conducted over the period November 2015-March 2016 informed mission findings.\n- Date of statement: May 9, 2016." }, { "heading": "Key policy messages (summary)", "content": "- Accelerate structural reforms to boost growth potential by broadening labor market participation of refugees, women, and older workers, and spurring competition in the services sector.\n- Step up public and private investment to meet infrastructure needs, while tackling administrative bottlenecks.\n- Remove impediments to housing supply expansion to better relieve the pressure on the housing market.\n- Develop the legal basis for real-estate-related macroprudential tools to better contain potential future excesses.\n- Improve financial sector oversight and macroprudential policy analysis by enhancing data collection.\n- Implement measures to strengthen the oversight role of banks’ supervisory boards by increasing their responsibilities and tightening member qualifications standards.\n- Together with the European competent authorities, complete the new bank resolution and crisis management agenda, as Germany is home to globally systemic institutions." }, { "heading": "Growth outlook and risks", "content": "- Growth in 2016 expected to remain moderate as strong domestic demand offsets weak foreign demand.\n- Drivers supporting domestic demand:\n - A sizable fiscal expansion.\n - Further ECB monetary stimulus.\n - Continued effect of lower energy prices.\n - Strong labor market boosting real disposable income.\n - Credit growth above trend supporting consumption.\n - Residential investment responding to surging housing demand.\n- Inflation dynamics:\n - Core and headline inflation expected to get close to 2 percent only in the medium-term as labor cost increases slowly pass through to prices.\n- Upside and downside risk factors:\n - Upside: large monetary and fiscal stimulus could lead to growth surprises.\n - Downside: further slowdown in external demand; erosion of confidence in the European project in parts of Europe; rekindling of stress in euro area sovereign bond markets." }, { "heading": "External position and current account", "content": "- The current account surplus is projected to stay near record levels in 2016.\n- Even if net exports’ growth contribution turns negative, favorable terms of trade effects will prevent a rapid fall in the surplus.\n- Persistent surplus reflects high savings and limited domestic investment, partly due to modest medium-term growth prospects and risks.\n- Net international investment position projected to reach almost 90 percent of GDP by 2020 owing to a persistently sizable surplus over the medium-term." }, { "heading": "Fiscal policy and public debt", "content": "- A sizable expansion in government spending in 2016 will be partly financed by revenue gains from a buoyant labor market and growing domestic demand.\n- New spending priorities: social transfers, asylum-seeker and refugee assistance, and, to a smaller extent, public investment; some income tax relief also implemented.\n- Fiscal stimulus expected to amount to close to 1 percent of GDP.\n- If revenues overperform, additional resources should be used to promote further investment.\n- Medium-run projections:\n - Budget balance expected to return to a surplus partially due to declining interest payments.\n - Public debt ratio expected to fall below 60 percent of GDP by 2020.\n - Structural fiscal balance expected to remain above the Stability and Growth Pact’s Medium Term Objective of -0.5 percent of GDP." }, { "heading": "Investment, infrastructure, and administrative capacity", "content": "- Public investment was low for many years, particularly at the municipal level, degrading planning and execution capacity.\n- Administrative and regulatory bottlenecks are holding back a more vigorous investment effort.\n- Recommended actions:\n - Rapidly remove planning and execution bottlenecks.\n - Reform and expand the Partnerschaften Deutschland agency (planned).\n - Create a federal transportation agency financed through user fees for federal roads maintenance and upgrading.\n - Stimulate private investment in fast broadband infrastructure and foster venture capital and e-procurement." }, { "heading": "Labor market, demographics, and pensions", "content": "- Projected decline in the labor force due to aging after 2020 necessitates measures to boost labor supply in the medium term.\n- Recommended labor supply measures:\n - Integrate current wave of refugees into the labor market.\n - Broaden opportunities for full-time employment of women.\n - Extend working lives of older workers.\n- Refugee integration measures:\n - Remove remaining restrictions to employment and training for asylum-seekers and persons with a temporary suspension of deportation.\n - Recognize informally acquired skills; facilitate flexible vocational training with strong on-the-job components and intensive language teaching.\n - Enhance active labor market policies (such as temporary wage subsidies).\n - Consider minimum wage decisions in light of refugee integration challenges.\n- Female labor supply:\n - Almost half of employed women work only part time; closing this gap would boost labor supply and productivity.\n - Use increased financial support for childcare to improve availability of high-quality full-time programs.\n - Move toward health insurance contributions depending on number of adult household members covered, with targeted support for lower income households.\n - Lower marginal tax wedges to incentivize greater labor supply.\n- Pension reform recommendations:\n - Index retirement age to life expectancy and make the choice to remain in the labor force actuarially neutral to promote longer working lives and reduce old-age poverty." }, { "heading": "Competition and services sector", "content": "- Competition-enhancing reforms in the services sector needed due to low productivity growth and slow progress.\n- Noted delays and issues:\n - Infringement procedures by the European Commission regarding minimum compulsory tariffs of architects and engineers not followed by action yet.\n - Act to Strengthen Competition in the Railway Sector under discussion for over three years; market share of new entrants in long-distance rail passenger segment remains below 1 percent.\n - Postal services competition hindered by ultra-dominant position of the domestic incumbent." }, { "heading": "Housing market and real estate", "content": "- Current price dynamics largely driven by fundamentals: demographic developments, rising incomes, higher construction costs, attractiveness of largest cities, and lower mortgage rates.\n- Mortgage credit growth trending up, but moderate with largely unchanged credit standards.\n- Concerns about a housing bubble considered premature.\n- Policy recommendations:\n - Collect granular and timely loan-to-loan data.\n - Establish legal basis for macroprudential tools targeted at the real estate sector rapidly.\n - Increase availability of publicly-owned building land; loosen height and zoning restrictions where pressures are highest.\n - Monitor implementation speed and effectiveness of the government’s housing supply package and be ready to reinforce measures if needed.\n - Improve real estate taxation efficiency by increasing property tax (through an update of property values) and reducing the real estate transfer tax rate to incentivize new construction." }, { "heading": "Financial sector: banking, insurance, supervision, and resolution", "content": "- Banking sector adjustments needed for prolonged low interest rates and structural challenges:\n - Low profitability reflects crisis legacy issues, compliance-related provisions, business model adjustments to post-crisis regulation and technological change, and structural inefficiencies.\n - Restructuring at large banks needs to progress; cost-cutting remains slow.\n - Fee-based activities picking up in smaller banks.\n - Risk-based solvency measures show substantial capital buffers on aggregate; non-performing loans generally low and declining; some institutions remain highly leveraged.\n- Life insurers:\n - Prolonged low interest rates erode ability to meet guaranteed commitments.\n - Supervisors should monitor the sector, demand action plans from firms in difficulty, and keep safety net arrangements under review.\n - Many life insurers expected to rely on long transitional measures under Solvency II; authorities should coordinate a communication plan ahead of publication of new solvency measures in 2017.\n- Supervisory and resolution agenda:\n - Single Supervisory Mechanism and Single Resolution Mechanism have had a positive impact per FSAP analysis.\n - Key priorities:\n - Improve comprehensiveness and granularity of supervisory data.\n - Communicate supervisory expectations to banks on supervisory boards’ roles, internal control and audit, related party exposures, and operational risk; develop guidelines and regulations to support enforceable measures.\n - Rapidly complete resolution planning for large cross-border banks.\n - Clarify coordination arrangements between European and domestic authorities to handle a systemic crisis.\n- Correspondent banking:\n - Large global banks withdrawing from correspondent relationships in a number of countries.\n - Authorities should encourage German banks to better manage risks in these activities and strengthen dialogue and cooperation among national supervisors to harmonize regulatory frameworks and facilitate cross-border information sharing on customer due diligence." }, { "heading": "Implementation and monitoring", "content": "- Urged rapid removal of investment and administrative bottlenecks.\n- Recommended close cooperation across levels of government for housing supply measures and readiness to reinforce policies if desired effects do not materialize.\n- Emphasized enhanced data collection and communication by supervisors to support macroprudential and supervisory actions.\n- Resolution planning and crisis coordination arrangements should be prioritized and completed with European counterparts.\n\nSource: Germany: Staff Concluding Statement of the 2016 Article IV Mission (May 9, 2016).\n\n---\n\n\n References\n\n- Germany and the IMF\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs050916" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/52/mcs050916/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/52/mcs050916/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/52/mcs050916/bundle-manifest.json)", "Published: May 9, 2016", "Concluding Statement describing preliminary findings of IMF staff at the end of an official staff visit (mission) undertaken as part of regular Article IV consultations.", "The authorities consented to publication. Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.", "FSAP conducted over the period November 2015-March 2016 informed mission findings.", "Date of statement: May 9, 2016.", "Accelerate structural reforms to boost growth potential by broadening labor market participation of refugees, women, and older workers, and spurring competition in the services sector.", "Step up public and private investment to meet infrastructure needs, while tackling administrative bottlenecks.", "Remove impediments to housing supply expansion to better relieve the pressure on the housing market.", "Develop the legal basis for real-estate-related macroprudential tools to better contain potential future excesses.", "Improve financial sector oversight and macroprudential policy analysis by enhancing data collection.", "Implement measures to strengthen the oversight role of banks’ supervisory boards by increasing their responsibilities and tightening member qualifications standards.", "Together with the European competent authorities, complete the new bank resolution and crisis management agenda, as Germany is home to globally systemic institutions.", "Growth in 2016 expected to remain moderate as strong domestic demand offsets weak foreign demand.", "Drivers supporting domestic demand:", "Inflation dynamics:", "Upside and downside risk factors:", "The current account surplus is projected to stay near record levels in 2016.", "Even if net exports’ growth contribution turns negative, favorable terms of trade effects will prevent a rapid fall in the surplus.", "Persistent surplus reflects high savings and limited domestic investment, partly due to modest medium-term growth prospects and risks.", "Net international investment position projected to reach almost 90 percent of GDP by 2020 owing to a persistently sizable surplus over the medium-term.", "A sizable expansion in government spending in 2016 will be partly financed by revenue gains from a buoyant labor market and growing domestic demand.", "New spending priorities: social transfers, asylum-seeker and refugee assistance, and, to a smaller extent, public investment; some income tax relief also implemented.", "Fiscal stimulus expected to amount to close to 1 percent of GDP.", "If revenues overperform, additional resources should be used to promote further investment.", "Medium-run projections:", "Public investment was low for many years, particularly at the municipal level, degrading planning and execution capacity.", "Administrative and regulatory bottlenecks are holding back a more vigorous investment effort.", "Recommended actions:", "Projected decline in the labor force due to aging after 2020 necessitates measures to boost labor supply in the medium term.", "Recommended labor supply measures:", "Refugee integration measures:", "Female labor supply:", "Pension reform recommendations:", "Competition-enhancing reforms in the services sector needed due to low productivity growth and slow progress.", "Noted delays and issues:", "Current price dynamics largely driven by fundamentals: demographic developments, rising incomes, higher construction costs, attractiveness of largest cities, and lower mortgage rates.", "Mortgage credit growth trending up, but moderate with largely unchanged credit standards.", "Concerns about a housing bubble considered premature.", "Policy recommendations:", "Banking sector adjustments needed for prolonged low interest rates and structural challenges:", "Life insurers:", "Supervisory and resolution agenda:", "Correspondent banking:", "Urged rapid removal of investment and administrative bottlenecks.", "Recommended close cooperation across levels of government for housing supply measures and readiness to reinforce policies if desired effects do not materialize.", "Emphasized enhanced data collection and communication by supervisors to support macroprudential and supervisory actions.", "Resolution planning and crisis coordination arrangements should be prioritized and completed with European counterparts.", "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/52/mcs050916/index.md", "json": "/en/news/articles/2015/09/28/04/52/mcs050916/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/52/mcs050916/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T23:41:50.430Z" }