{ "title": "Germany: Staff Concluding Statement of the 2022 Article IV Mission", "publication": "IMF News, May 23, 2022", "sourceUrl": "https://www.imf.org/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission", "overlayPath": "/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "summary": "Germany: Staff Concluding Statement of the 2022 Article IV Mission", "publishDate": "2022-05-23", "sections": [ { "heading": "Economic outlook and risk assessment", "content": "- Mission conducted during May 9 ‒23, 2022.\n- Near-term impacts: fallout from the war in Ukraine and COVID-related disruptions are slowing the recovery; spike in energy prices has pushed inflation to multi-decade highs.\n- Baseline growth projections:\n - Growth is projected to slow to about 2 percent in 2022, from 2.9 percent in 2021.\n - Growth is projected to pick up in 2023 to slightly above 2 percent if energy prices and supply bottlenecks subside, and COVID infections remain under control.\n - Growth would then decline toward potential after 2024; output would remain below the pre-pandemic trend in the medium term.\n- Inflation projections:\n - Inflation is expected to stay elevated at about 6½ percent in 2022.\n - Inflation is expected to moderate to about 3½ percent in 2023.\n- Downside and tail risks:\n - Greatest threat: persistent and complete shut-off of Russia’s gas exports, which would take at least two years to fully replace in Germany.\n - Other risks: tighter sanctions or disruptions from the war; COVID-related restrictions intensifying global supply bottlenecks; persistently high inflation prompting faster-than-expected central bank tightening; delays in renewable energy deployment or digitalization; fragmentation of global value chains." }, { "heading": "Fiscal policy stance and recommendations", "content": "- Near-term stance:\n - Fiscal stance projected to be broadly neutral in 2022.\n - Key pandemic supports are set to expire; new measures introduced to cushion war impacts.\n - Government plan to return to the debt brake rule in 2023 can be attained by phasing out remaining pandemic support and energy relief measures as scheduled under baseline assumptions.\n- Flexibility under downside scenarios:\n - Allow automatic stabilizers to operate fully.\n - Continue to flexibly provide targeted support if downside risks materialize.\n - Consider activating the escape clause of the debt break rule for another year if necessary.\n- Use of fiscal space:\n - Continue to use available fiscal space to invest in resiliency: energy security, progress toward net zero emissions, life-long learning, digitalization, innovation, labor supply, and social protection.\n - Warning: extensive use of extra-budgetary funds outside the core federal budget to create borrowing allowances may undermine fiscal framework credibility; structural increases in strategic spending should be integrated into the core budget over time." }, { "heading": "Immediate priorities: cushioning the war’s spillovers and building resilience", "content": "- Objectives: secure gas supplies, cushion economic spillovers, prevent scarring (bankruptcies, layoffs), and deepen financial system threat assessment.\n- Assessment of government measures:\n - Government package includes one-off income support payments to vulnerable individuals (commended as cost-effective and preserving energy-conservation incentives).\n - Broad-based relief (e.g., temporary cuts to fuel taxes) are fiscally costly and distort price signals.\n- Energy resilience and demand reduction:\n - Higher gas reserves are needed urgently; subsidies for firms’ energy expenditures outlined in early April should be phased out as planned, at the latest.\n - Consider meaningful financial incentives to encourage voluntary gas-saving behavior; earlier and greater demand reduction reduces potential GDP impact in a shut-off event." }, { "heading": "Energy security, diversification, and regional cooperation", "content": "- Actions taken: diversification of gas sources, securing additional liquefied natural gas (LNG) supplies, financing facilities to re-gasify LNG, activating first stage of national emergency plan for gas, laws requiring companies to fill gas storage before winter, and emergency powers over infrastructure and price adjustments.\n- Policy recommendations:\n - Increase transparency about gas shortfall scenarios and infrastructure bottlenecks to encourage investment and crisis planning.\n - Strengthen cooperation with EU countries and via REPowerEU to secure supplies and ensure adequate infrastructure and legal frameworks for sharing gas in shortages.\n - Build on solidarity agreements with Denmark and Austria; explore further agreements with neighboring countries, including for land-locked countries dependent on flows through Germany." }, { "heading": "Gas shut-off scenario and contingency policies", "content": "- Estimated impact: most existing studies put the output loss at up to 6 percent of GDP over one to two years.\n- Policy responses:\n - Automatic stabilizers as first line of defense.\n - Ensure solvency of energy companies to avoid financial constraints exacerbating shortages; plan to allow energy companies to pass on cost increases to end-users in an emergency should be complemented with targeted income support for vulnerable households.\n - Firms’ demand for government liquidity support facilities would grow; further discretionary financial support to firms might be necessary.\n - Authorities’ ongoing assessments of economic and financial implications are crucial for planning support.\n - If rationing becomes necessary, consider macroeconomic implications alongside technical, legal, and social dimensions." }, { "heading": "Investment priorities: green transition and public investment", "content": "- Imperative: fast-track green transition given uncertain fossil fuel supplies.\n- Role of private vs public investment:\n - Much green investment must be private; strong carbon pricing is key to mobilize it.\n - Scaling up public green investment is vital for network externalities and to crowd in private investment (examples: electricity transmission upgrades, expansion of electric-vehicle charging stations).\n- Policy actions to boost public investment:\n - Simplify administration and enhance planning capacity, financing, and coordination across levels of government urgently.\n - Use investment to help reduce Germany’s large external imbalances." }, { "heading": "Labor supply, skills, and demographic challenges", "content": "- Issues:\n - Labor force contracted during the pandemic; unless participation—especially for those 40 years and older—resumes or immigration recovers, Germany faces a diminishing labor force and growing dependency ratio.\n- Recommendations:\n - Expand high-quality childcare and strengthen incentives to work for secondary earners to promote female labor-force participation and working hours.\n - Continue easing immigration rules to address skilled-worker shortages and complement with integration efforts.\n - Reduce the labor tax for lower-skilled workers to boost disposable income and stimulate labor supply.\n - Enhance training and up- or re-skilling to address skill mismatches, support the green transition, and adapt to digitalization." }, { "heading": "Financial sector resilience and FSAP findings", "content": "- FSAP assessment: German banking sector generally resilient to shocks, but pockets of vulnerability exist.\n- Stress test findings:\n - Overall bank capital is generally sufficient to withstand a severe adverse scenario including a three-standard deviation shock to growth over two years.\n - Banking system appears resilient to liquidity shocks.\n - Stress tests identify shortfalls of capital and US dollar liquidity at some individual banks under the adverse scenario.\n - Structurally low bank profitability remains a vulnerability.\n- Policy recommendations:\n - Continue close monitoring of prudential ratios for large, systemically important commercial banks.\n - Establish additional bank-specific buffers for less capitalized banks as needed.\n - Strengthen data collection at less systemically-important institutions on remaining maturity of retail deposits, wholesale funding, and interest-bearing assets to enable top-down stress tests of interest rate risk.\n - Review and consolidate the fragmented deposit insurance system into a single scheme with a government liquidity backstop to facilitate greater risk pooling and diversification." }, { "heading": "Housing market and macroprudential policy", "content": "- Assessment:\n - House prices estimated to be above fundamental levels for Germany overall, with greater misalignments in larger cities.\n - Mortgage origination strong; lending standards somewhat loose in certain segments.\n- Actions taken:\n - Authorities raised the counter-cyclical capital buffer and introduced a sectoral systemic risk buffer on loans secured by domestic residential real estate, with a phase-in period through end-January 2023.\n - Authorities cautioned banks against taking excessive mortgage lending risk.\n- Further recommendations:\n - Precautionary use of borrower-based measures is warranted.\n - Modify the law on borrower-based measures to remove activation obstacles; in the interim strengthen guidance on lending standards.\n - Accelerate closure of data gaps and add income-based measures to the macroprudential toolkit.\n\nIMF mission concluding statement issued May 23, 2022.\n\n---\n\n\n References\n\n- Germany and the IMF\n- Russian Federation and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json)", "Published: May 23, 2022", "Mission conducted during May 9 ‒23, 2022.", "Near-term impacts: fallout from the war in Ukraine and COVID-related disruptions are slowing the recovery; spike in energy prices has pushed inflation to multi-decade highs.", "Baseline growth projections:", "Inflation projections:", "Downside and tail risks:", "Near-term stance:", "Flexibility under downside scenarios:", "Use of fiscal space:", "Objectives: secure gas supplies, cushion economic spillovers, prevent scarring (bankruptcies, layoffs), and deepen financial system threat assessment.", "Assessment of government measures:", "Energy resilience and demand reduction:", "Actions taken: diversification of gas sources, securing additional liquefied natural gas (LNG) supplies, financing facilities to re-gasify LNG, activating first stage of national emergency plan for gas, laws requiring companies to fill gas storage before winter, and emergency powers over infrastructure and price adjustments.", "Policy recommendations:", "Estimated impact: most existing studies put the output loss at up to 6 percent of GDP over one to two years.", "Policy responses:", "Imperative: fast-track green transition given uncertain fossil fuel supplies.", "Role of private vs public investment:", "Policy actions to boost public investment:", "Issues:", "Recommendations:", "FSAP assessment: German banking sector generally resilient to shocks, but pockets of vulnerability exist.", "Stress test findings:", "Policy recommendations:", "Assessment:", "Actions taken:", "Further recommendations:", "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)", "[Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "json": "/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2022/05/23/germany-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T01:15:04.960Z" }