Abstract
This paper discusses the economic performance of Germany. The economy of Germany is projected to slowly rebalance, with domestic demand supported by tight labor market, accommodative monetary conditions, and, in 2016, a fiscal expansion. Declining medium-term growth prospects, however, continue to hold back domestic investment and push up savings, preventing faster rebalancing. Progress has been slow on addressing needs in public infrastructure and stimulating competition in services sector, while mounting aging costs and a successful labor market integration of women and refugees require further policy action. Full use of the room available under fiscal rules to finance additional public investment and growth-friendly structural reforms would be appropriate.
Fund Relations
(As of May 31, 2016; unless specified otherwise)
Mission: April 27–May 9, 2016 in Berlin, Bonn, Frankfurt, and Nuremberg. The concluding statement of the mission is available at http://www.imf.org/external/np/ms/2016/050916.htm.
Staff team: Ms. Detragiache (Head), Ms. Pereira, Messrs. Natal, Vandenbussche, and Xie (all EUR).
Country interlocutors: Parliamentary State Secretary Spahn, Bundesbank President Weidmann, senior representatives at the Chancellery, the Ministry of Finance, the Ministry of Economic Affairs and Energy, the Ministry of Labor, the Ministry of Transport and Digital Infrastructure, the Ministry for the Environment, the Bundesbank, and the Federal Office for Migration and Refugees. Mr. Meyer, Executive Director, also participated in the discussions. Additional meetings took place with industry, think tanks, trade unions, and financial market participants, as well as academics.
Fund relations: The previous Article IV consultation discussions took place during April–May 2015 and the staff report was discussed by the Executive Board on July 10, 2015. The Executive Board’s assessment and staff report are available at http://www.imf.org/external/pubs/cat/longres.aspx?sk=43082.0.
Membership Status: Joined August 14, 1952; Article VIII.
General Resources Account:
| SDR Million | Percent of Quota | ||
| Quota | 26,634.40 | 100.00 | |
| Fund holdings of currency | 23,518.01 | 88.30 | |
| Reserve position in Fund | 3,116.43 | 11.70 | |
| Lending to the Fund | 2,321.61 | ||
| SDR Million | Percent of Quota | ||
| Quota | 26,634.40 | 100.00 | |
| Fund holdings of currency | 23,518.01 | 88.30 | |
| Reserve position in Fund | 3,116.43 | 11.70 | |
| Lending to the Fund | 2,321.61 | ||
SDR Department:
| SDR Million | Percent of Allocation | ||
| Net cumulative allocation | 12,059.17 | 100.00 | |
| Holdings | 11,902.90 | 98.70 | |
| SDR Million | Percent of Allocation | ||
| Net cumulative allocation | 12,059.17 | 100.00 | |
| Holdings | 11,902.90 | 98.70 | |
Outstanding Purchases and Loans: None
Financial Arrangements: None
Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs, as of May 31, 2015):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | 2020 | |
| Principal | |||||
| Charges/Interest | 0.04 | 0.50 | 0.50 | 0.50 | 0.50 |
| Total | 0.04 | 0.50 | 0.50 | 0.50 | 0.50 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | 2020 | |
| Principal | |||||
| Charges/Interest | 0.04 | 0.50 | 0.50 | 0.50 | 0.50 |
| Total | 0.04 | 0.50 | 0.50 | 0.50 | 0.50 |
Exchange Rate Arrangement
Germany’s currency is the euro, which floats freely and independently against other currencies.
Germany is an Article VIII member and maintains an exchange system free of restrictions on payments and transfers for current international transactions. It maintains measures adopted for security reasons, which have been notified to the Fund for approval in accordance with the procedures of Decision 144 and does so solely for the preservation of national or international security.
Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT)
Germany was last assessed against the previous AML/CFT standard in 2009. Some shortcomings were identified inter alia with respect to the money laundering (ML) and terrorist financing (TF) offenses, and AML/CFT preventive measures (including the reporting of suspicious transaction requirements, and customer due diligence, CDD, requirements). In recent years, Germany has introduced significant reforms to enhance its AML/CFT regime. It notably criminalized self-laundering and immobilized bearer shares, enhanced domestic cooperation, and improved the supervisory framework for designated non-financial business and professions (DNFBPs) and the risk analysis model applied by BaFin for AML/CFT supervision. Onsite visits to financial institutions and DNFBPs have increased. Germany is currently conducting a national assessment of its ML and TF risks.
Overall, the AML/CFT framework appears strong, but some weaknesses remain. Amongst others, Germany should consider expanding the range of predicate offenses to ML to include offenses—in particular serious tax offenses—not only when aggravating circumstances are met but also in their absence, when the offenses generate significant amounts of proceeds. Germany should also enhance AML/CFT supervision of banks with cross-border operations and as priority, should give additional attention to the supervision and audit review of banks’ risk assessments and applicable control measure, enhance information flow and cooperation between BaFin, ECB and the Bundesbank on AML/CFT issues and increase staffing. Finally, Germany should take further measures to facilitate timely access to beneficial ownership information of legal persons.
The next assessment of Germany’s AML/CFT framework is tentatively scheduled to take place in 2021.
Statistical Issues
(AS OF MAY 24,2016)
| I. Assessment of Data Adequacy for Surveillance | |
| General: The economic database is generally comprehensive and of high quality, and data provision is adequate for surveillance. | |
| National Accounts: Germany adopted the European System of Accounts 2010 (ESA2010) in September 2014. The 2006 ROSC Data Module mission found that the macroeconomic statistics generally follow internationally accepted standards and guidelines on concepts and definitions, scope, classification and sectorization, and basis for recording. However, the sources for estimating value added for a few categories of service industries could be improved. A direct source for quarterly changes in inventories, which is an important indicator of changes in GDP over the business cycle, is lacking. Extrapolations of changes in inventories are based on the difference between the monthly production index and turnover index in manufacturing. | |
| Government Finance Statistics: Comprehensive data reporting systems support the accuracy and reliability of the government finance statistics. However, these data are based on cash accounting systems, although documentation exists to explain the differences between the general government data in the ESA2010 (noncash) classification and the general cash data on an administrative basis; Germany publishes—through Eurostat—general government revenue, expenditure, and balances on a noncash/ accrual basis on a quarterly basis (ESA2010) and these data are presented in a GFSM 2001 format in International Financial Statistics, albeit with delay. Germany submits annual data for publication in the Government Financial Statistics Yearbook, in GFSM 2001 format. Monthly data are only disseminated on a cash-basis and are reported to STA. | |
| Monetary and Financial Statistics: The ECB reporting framework is used for monetary statistics and data are reported to the IMF through a “gateway” arrangement with the ECB. The arrangement provides an efficient transmission of monetary statistics to the IMF and for publication in the IFS. Monetary statistics for Germany published in the IFS cover data on central bank and other depository corporations (ODCs) using Euro Area wide residency criterion. Data based on national residency criterion is also published as memorandum items. | |
| Financial Sector Surveillance: Germany participates in the IMF’s Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS) and financial soundness indicators (FSIs) databases. The German authorities compiled a comprehensive set of FSI data and metadata. Of the 40 FSIs, Germany reports all except net foreign exchange exposure to equity (I31). Even though Germany reports all of the 12 core FSIs, six FSIs are reported on an annual basis only: (i) NPL Net of Provisions to Capital, (ii) NPL to Total Gross Loans, (iii) Return on Assets, (iv) Return on Equity, (v) Interest Margin to Gross Income, and (vi) Non-Interest Expense to Gross Income. Plans are already underway to change the legal basis for the periodicity of deposit taking institutions’ reporting requirements. In addition, the quality of data on bank exposures submitted to the BIS needs to be improved, including provision of the data on ultimate risk basis for advanced countries. | |
| External Sector Statistics: The Bundesbank compiles the balance of payments in close cooperation with the Federal Statistical Office. Balance of payments, International Investment Position statistics, and related cross-border statistics are compiled according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), and the legal requirements of the ECB and Eurostat. | |
| II. Data Standards and Quality | |
| Adherent to the Special Data Dissemination Standards Plus (SDDS Plus) since February 2015. Implementing G-20 DGI recommendations: Currently disseminates a residential property price index and a commercial property price index. |
Data ROSC from 2006 is available. |
| I. Assessment of Data Adequacy for Surveillance | |
| General: The economic database is generally comprehensive and of high quality, and data provision is adequate for surveillance. | |
| National Accounts: Germany adopted the European System of Accounts 2010 (ESA2010) in September 2014. The 2006 ROSC Data Module mission found that the macroeconomic statistics generally follow internationally accepted standards and guidelines on concepts and definitions, scope, classification and sectorization, and basis for recording. However, the sources for estimating value added for a few categories of service industries could be improved. A direct source for quarterly changes in inventories, which is an important indicator of changes in GDP over the business cycle, is lacking. Extrapolations of changes in inventories are based on the difference between the monthly production index and turnover index in manufacturing. | |
| Government Finance Statistics: Comprehensive data reporting systems support the accuracy and reliability of the government finance statistics. However, these data are based on cash accounting systems, although documentation exists to explain the differences between the general government data in the ESA2010 (noncash) classification and the general cash data on an administrative basis; Germany publishes—through Eurostat—general government revenue, expenditure, and balances on a noncash/ accrual basis on a quarterly basis (ESA2010) and these data are presented in a GFSM 2001 format in International Financial Statistics, albeit with delay. Germany submits annual data for publication in the Government Financial Statistics Yearbook, in GFSM 2001 format. Monthly data are only disseminated on a cash-basis and are reported to STA. | |
| Monetary and Financial Statistics: The ECB reporting framework is used for monetary statistics and data are reported to the IMF through a “gateway” arrangement with the ECB. The arrangement provides an efficient transmission of monetary statistics to the IMF and for publication in the IFS. Monetary statistics for Germany published in the IFS cover data on central bank and other depository corporations (ODCs) using Euro Area wide residency criterion. Data based on national residency criterion is also published as memorandum items. | |
| Financial Sector Surveillance: Germany participates in the IMF’s Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS) and financial soundness indicators (FSIs) databases. The German authorities compiled a comprehensive set of FSI data and metadata. Of the 40 FSIs, Germany reports all except net foreign exchange exposure to equity (I31). Even though Germany reports all of the 12 core FSIs, six FSIs are reported on an annual basis only: (i) NPL Net of Provisions to Capital, (ii) NPL to Total Gross Loans, (iii) Return on Assets, (iv) Return on Equity, (v) Interest Margin to Gross Income, and (vi) Non-Interest Expense to Gross Income. Plans are already underway to change the legal basis for the periodicity of deposit taking institutions’ reporting requirements. In addition, the quality of data on bank exposures submitted to the BIS needs to be improved, including provision of the data on ultimate risk basis for advanced countries. | |
| External Sector Statistics: The Bundesbank compiles the balance of payments in close cooperation with the Federal Statistical Office. Balance of payments, International Investment Position statistics, and related cross-border statistics are compiled according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), and the legal requirements of the ECB and Eurostat. | |
| II. Data Standards and Quality | |
| Adherent to the Special Data Dissemination Standards Plus (SDDS Plus) since February 2015. Implementing G-20 DGI recommendations: Currently disseminates a residential property price index and a commercial property price index. |
Data ROSC from 2006 is available. |
Germany: Table of Common Indicators Required for Surveillance
(As May 24, 2016)
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 9, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.
Germany: Table of Common Indicators Required for Surveillance
(As May 24, 2016)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness 9 | Data Quality–Accuracy and reliability 10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 16 | May 16 | M | M | M | ||
| Reserve/Base Money2 | April 16 | May 16 | M | M | M | ||
| Broad Money2 | April 16 | May 16 | M | M | M | ||
| Central Bank Balance Sheet | April 16 | May 16 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 16 | May 16 | M | M | M | ||
| Interest Rates3 | May 16 | May 16 | M | M | M | ||
| Consumer Price Index | April 16 | May 16 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4—General Government5 | Q4 15 | May 16 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 15 | May 16 | A | A | A | ||
| External Current Account Balance | Q4 15 | May 16 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 16 | May 16 | M | M | M | ||
| GDP/GNP | Q1 16 | May 16 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 15 | March 16 | Q | Q | Q | ||
| International Investment Position7 | Q4 15 | March 16 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 9, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.
Germany: Table of Common Indicators Required for Surveillance
(As May 24, 2016)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness 9 | Data Quality–Accuracy and reliability 10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 16 | May 16 | M | M | M | ||
| Reserve/Base Money2 | April 16 | May 16 | M | M | M | ||
| Broad Money2 | April 16 | May 16 | M | M | M | ||
| Central Bank Balance Sheet | April 16 | May 16 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 16 | May 16 | M | M | M | ||
| Interest Rates3 | May 16 | May 16 | M | M | M | ||
| Consumer Price Index | April 16 | May 16 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4—General Government5 | Q4 15 | May 16 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 15 | May 16 | A | A | A | ||
| External Current Account Balance | Q4 15 | May 16 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 16 | May 16 | M | M | M | ||
| GDP/GNP | Q1 16 | May 16 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 15 | March 16 | Q | Q | Q | ||
| International Investment Position7 | Q4 15 | March 16 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 9, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.