IMF: German economy will recover this year

The conditions are in place for the German economy, Europe's biggest, to recover this year - and lead the eurozone back to growth - unless the crisis intensifies further, the IMF said on Tuesday.

IMF: German economy will recover this year
Photo: DPA

“Several conditions are in place in Germany for a domestic demand-led recovery following the downturn at end-2011,” the International Monetary Fund wrote in a new report on Germany.

Germany’s economic performance throughout the crisis so far “has been remarkable, despite a difficult environment,” the head of the IMF mission to Germany, Subir Lall, said during a telephone conference call.

Germany expanded strongly for most of last year, but growth shuddered to a halt in the final quarter, when it contracted by 0.2 percent.

Nevertheless, the dip was only short-lived and gross domestic product (GDP) rebounded again to expand by 0.5 percent in the first three months of this year.

While the IMF was pencilling in much slower GDP growth of around 0.1 percent in the second quarter, the economy should gather momentum and reach its potential for growth of around 1.25 percent in the second half of the year, Lall said.

Healthy corporate and household balance sheets, higher wages, well anchored inflation expectations, and low borrowing costs would act as a boost by keeping domestic demand strong, the IMF said.

Taking 2012 as a whole, the fund said it was projecting GDP to expand by 1.0 percent, down from 3.1 percent in 2011. Growth would then pick up to 1.4 percent in 2013, it predicted.

The near-term outlook was, however, “clouded by a number of downside risks,” the IMF cautioned.

The biggest of these would be a possible further intensification of the eurozone’s sovereign debt crisis, “which would spill over into Germany directly through real and financial channels, and indirectly through dampened business and consumer sentiment,” it said.

Slower global growth prospects and an abrupt rise in oil prices could also cloud the outlook for activity, it said.

As Europe’s biggest economy, Germany could play a “pivotal role in addressing the challenges posed by the crisis” and “reinforce reform momentum in the euro area,” the IMF suggested.

In economic terms, it could rebalance its own economy away from the hitherto strong dependence on exports and seek to strengthen domestically driven growth.

That would “help raise the economy’s potential … while generating positive outward spill-overs” elsewhere in the single currency area, the IMF said.


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‘I’d do it again’: Refugees reflect on their journey to Germany five years on

German Gracia Schuette and Syrian Aeham Ahmad both had their lives changed forever by Angela Merkel's decision in 2015 to leave Germany's doors open to hundreds of thousands of refugees.

'I'd do it again': Refugees reflect on their journey to Germany five years on
Syrian pianist Aeham Ahmad while still living in a hostel in 2016. Photo: Daniel Roland/AFP
In August of that year, Schuette joined thousands of volunteers serving ladles of hot soup to exhausted migrant families arriving at Munich's main train station.
Having been held in Hungary after travelling the length of Europe, trains overflowing with refugees from Syria, Iraq and Afghanistan had begun arriving at the station in a seemingly endless convoy.
Ahmad was a passenger on one of them. The Syrian pianist with Palestinian roots arrived in Munich on September 23.
A month earlier, he had left Yarmouk, a sprawling neighbourhood in the south of Damascus, after swathes of the area were occupied by the Islamic State (IS) jihadist group.
He left behind his wife and two boys, still too young to embark on such a perilous journey.
Now 32, Ahmad has built a career for himself that involves travelling all over Europe and as far afield as Japan to give concerts.
At the station in Munich, where the volunteers once served hot soup, a Covid-19 test centre now stands.
Gracia Schuette stands at the main train station in Munich, the arrival place of many refugees in 2015. Photo: Christof Stache/AFP
Schuette, 36, says the experience changed her attitude to life and taught her “gratitude and the awareness that despite everything that happens in Germany, it is still a very safe country”.
Ahmad speaks to AFP from a train heading to the north of Germany, where he is due to give a concert.
He remembers his first days in Germany as a time of great confusion. Like tens of thousands of other Syrians arriving in the country, he had only one word on his lips: “Alemania!” — Germany.
“After I arrived in Munich, I was sent to several emergency reception centres and then to Wiesbaden” near Frankfurt, where he and his uncle were given a room in a hostel, he says in a mixture of English and German.
He remembers the “extreme kindness” shown by volunteers like Schuette — “that community of people who said, 'We have to help'”.
For Schuette, it was important to feel that she was “not just a spectator” watching events unfold but willing to “act decisively” by helping to distribute basic necessities or set up camp beds.
Today, she works as an administrator for a kindergarten. But she has maintained her commitment to helping refugees — so much so that she has even taken three young people into her home, one of whom still lives with her.
Having been granted refugee status a year after his arrival in Germany, Ahmad was joined by his wife and children.
The family have since moved to Warburg, a town in northwestern Germany, and seven months ago welcomed a new baby girl.
While still in Syria, Ahmad had made a name for himself on social media with videos of songs performed amid the ruins of his ravaged home country.
'No accent'
In Germany, he began to sing songs about homesickness, with the aim of raising awareness in his new country and the rest of Europe of “this stupid war” that has devastated Syria for more than nine years.
Today, he aspires to “bring cultures together, to create a dialogue between Eastern and Western music”.
Having given more than 720 concerts, he has at times felt exhausted. But “anything is better than living off state subsidies” as he did during his first months in Germany, he believes.
If Schuette could go back and do it all again, she would.
“I don't think I would be someone who just says, 'It's going to work out and everything's going to be great.' You have to be realistic,” she said, pointing to the difficulties of integration. “But there's no doubt about it: I'd do it again.”
Ahmad, too, avoids painting a rose-tinted picture of his story. His generation, he says, will be scarred for life by the horrors of war and the  difficulties of adapting to life in exile.
But there is pride in his voice as he reveals that his two sons already speak German “without the slightest accent”.