On 10 July 2019, the IMF issued a report following the conclusion of the Article IV consultation with Germany.
Germany’s real GDP growth has averaged over 2% for some years but slowed to 1.5% in 2018 owing to reduced global demand and problems in the auto and chemical industries. The economic outlook is uncertain due to the risk of increasing global protectionism, slower growth in China or a no-deal Brexit, which could all affect Germany’s export-dependent economy. Also growth could be slowed in the medium term by demographic factors, low growth in productivity and global trade tensions.
The IMF considers that policy measures are needed to ensure that the advantages of the strong economy are shared throughout society, for example by increasing disposable income through the tax and benefit system. The government should therefore consider tax measures to help low-and middle-income households, combined with incentives to encourage participation in the workforce by female and elderly people and a tax credit for further research and development.
The IMF agrees with government efforts to promote fair corporate taxation and find solutions to international tax issues.
Structural reforms are required to promote innovation, investment, and competition. Measures are required to upgrade Germany’s digital infrastructure, implement the e-government strategy and facilitate access to venture capital. The IMF also welcomes the government’s willingness to consider a carbon tax and the use of carbon pricing to reduce greenhouse gas emissions.
