On 24 June 2016 the IMF published a report and selected issues paper following the conclusion of consultations with Germany under Article IV of the IMF’s articles of agreement.

Germany’s economy has continued its growth momentum with domestic demand offsetting weak foreign demand. Public consumption and investment have also remained buoyant. Moderate growth momentum is expected to continue with a sizeable fiscal expansion and ECB monetary stimulus offsetting the weakness of key trading partners. GDP is estimated to grow at a rate of 1.7% in 2016 and 1.5% in 2017. These estimates do not however take into account any impact on Germany from the Brexit referendum outcome.

The IMF considers that progress on structural reforms is required for medium term growth. This should include measures to promote labor force participation by women, older workers and immigrants; and reforms to taxation, pensions and health insurance contributions. Steps must be taken to promote competition and productivity in the services sector.

The IMF also noted that action has been taken to ease supply in the housing sector including the introduction of tax incentives for new rental housing units. They consider that reforms should also be made to the real estate transaction tax. Authority to set the tax rate was transferred to the Länder in 2006 and the rate has increased by over 3 percentage points in the past decade. The tax burden is a disincentive to new construction. One possible reform to make the tax less distortionary would be give a deduction for the land transfer tax against the real estate transfer tax for new buildings built by developers and then sold to households.