Ifo Economic Forecast 2016–2018: Germany’s Robust Economy Faces a Year of Uncertain International Economic Policy

On 16 December 2016 the Ifo Institute presented its economic forecast for the years 2016, 2017 and 2018. The robust upturn experienced by the German economy as of 2013 is expected to continue. The Ifo Institute expects real gross domestic product to grow by 1.9 percent this year. This figure will drop to 1.5% in 2017, purely due to the lower number of working days in the calendar year compared to 2016. In 2018 real gross domestic product is expected to increase by 1.7 percent. The risks related to this forecast, however, are exceptionally high. With the Brexit referendum, the US presidential election and the failed constitutional reform in Italy, the global political landscape has changed radically, which may have far-reaching and highly uncertain implications for the world economy and for Germany in the years ahead. If US financial policy – as announced by the country’s new president-elect – does indeed become far more expansive, this should provide the US and the global economy with significant positive stimuli. A high and lasting degree of political uncertainty, as well as growing political and economic disintegration, on the other hand, would cast a shadow over the economic outlook.