Thursday 22 March 2018

Spending on refugees helps support German fourth quarter growth

Protesters in Germany chanting for refugees to go home Credit: janboehm
Protesters in Germany chanting for refugees to go home Credit: janboehm

State spending driven partly by the costs of caring for refugees and higher investment drove a steady 0.3 percent economic expansion in Germany in the fourth quarter, more than compensating for a drop in exports.

Confirming a preliminary reading, the Federal Statistics Office said on Tuesday that state spending, which rose by 1.0 percent on the previous quarter, contributed 0.2 percentage points to gross domestic product in the October-December period.

Investment increased by 2.4 percent on the quarter, contributing 0.4 percentage points to growth. Trade was a drag, subtracting 0.5 points from growth.

Germany is spending billions of euros on housing, integrating and finding work for a record number of refugees fleeing conflicts and poverty in the Middle East and elsewhere. At the same time, record-high employment, rising wages, low inflation, and cheaper gasoline have boosted private spending.

That is helping to compensate for a drop in exports, traditionally the driver of Europe's biggest economy.

"The fourth quarter tells the same story as previous quarters. We have weaker exports mainly because of problems in emerging markets but also because the United States imported less from Germany," said DekaBank analyst Andreas Scheuerle.

"The story will remain the same for the rest of the year, with weaker foreign trade and stronger domestic demand because of higher state spending and consumption."

Recent data has shown factory orders, exports and imports falling while the mood among German investors has worsened.

The Ifo institute is due to publish its closely-watched business morale index for February later on Tuesday. It is expected to fall after hitting its lowest level in almost a year in January.


Business Newsletter

Read the leading stories from the world of Business.

Also in Business