The German Institute for Economic Research in Berlin (DIW) has published another report on the prospects for the German economy. It confirms the forecast given at the beginning of the summer: Germany's GDP growth will be 1.8 percent in 2015 and will accelerate slightly to 1.9 percent in 2016. Thus, this research center believes that the mass influx of refugees into the country will not have short-term negative consequences for Europe's largest economy.
As the head of DIW's macroeconomics department Ferdinand Fichtner told reporters, thanks to refugees, economic growth rates in Germany could be about a quarter of a percentage point higher next year than expected. The scientist explains this by the increase in government spending on the reception, education and integration of people who have applied for political asylum in Germany.
All these funds will in one way or another enter the domestic market, the expert points out. Moreover, the vast majority of the cash given to refugees will be spent on consumption and "will return to the German economy." Thus, "net spending on refugees will not be as high as the figures currently circulating," assures Ferdinand Fichtner.
The DIW report forecasts that gross spending on the reception of 800,000 people this year and roughly the same number next year (with at least 40 percent of them receiving asylum in Germany and the rest being deported from the country) will amount to 9.2 billion euros in 2016. Despite these additional expenditures, federal and regional budgets will end both 2015 and 2016 with a very significant overall surplus, the Berlin scientists assert. They expect 18.5 billion and 20 billion euros respectively.
Experts from the Rhine-Westphalia Institute for Economic Research in Essen (RWI) come to roughly the same conclusions. In a report published on September 10, they predict GDP growth for Germany this year at 1.8 percent, and for next year they lower the forecast from 1.9 percent to 1.8 percent, explaining this mainly by the fact that "the stimulating effect of falling oil prices on household purchasing power is coming to an end." In their opinion, the overall budget surplus in 2015 will be higher than in 2016.
Like their colleagues from DIW, the Essen scientists assume that the unemployment rate in Germany will remain at its current level of 6.4 percent until the end of next year. Thus, they do not expect a deterioration in the labor market situation due to the influx of refugees, although they admit that its economic consequences are still difficult to predict. In the short term, the RWI report notes, "additional strain on social systems is possible."
However, in the medium and long term, "migrants, especially due to their low average age, could help reduce the burden on social systems." Everything will depend on the extent to which they can be employed. According to the Essen experts, the chances for this are good, because due to the aging of German society, the labor potential of Germany is shrinking. The increase in the number of vacancies shows that enterprises are finding it increasingly difficult to find suitable workers. "So migrants could help improve the prospects for economic growth in Germany," the RWI report emphasizes.
According to the Institute for Economic Research in Halle (IWH), 1.46 million people moved to Germany in 2014, while 0.91 million left. Thus, the net migration gain was 550,000 people. Of these, 55 percent were citizens of EU countries. This year, net migration could, according to IWH estimates, reach 750,000 people (in 2013 it was 429,000). Nevertheless, in 2016 "registered unemployment will continue to decline," the experts believe, citing "a sharp increase in the number of vacancies."
"Nobody should fear for their job because of the refugees," says Professor Michael Hüther, director of the German Economic Institute in Cologne (IW). According to him, in conditions of economic growth and a labor market boom, the struggle for the redistribution of benefits is weakening. Germany "is quite capable of taking in a net 500,000 migrants per year, as the results of 2014 show."
However, "politicians should specifically direct them to the regions where they are especially needed," the head of IW emphasizes in the newspaper Rheinische Post and points primarily to Eastern Germany. "Many East German regions will become depopulated in ten years if politicians do not take countermeasures now." At the same time, the share of foreigners there is usually only 2 percent, Professor Hüther reminds.
Analysts from major banks also see more opportunities than risks in the current influx of refugees. UniCredit's chief economist for Germany, Andreas Rees, forecasts that refugees, by joining the labor process, could increase Germany's GDP by 50 billion euros or about 1.7 percent by 2020.
In other words, he suggests that refugees are essentially capable of delivering a whole year's worth of GDP growth for Germany. The expert assumes that 800,000 refugees will arrive in Germany this year, 500,000 annually in subsequent years, and in the medium term every second migrant will find a job.
If the necessary measures are taken to integrate refugees into the labor market, then "the new wave of immigration will open up the prospect of rejuvenating aging European societies and provide a positive economic effect, especially in Germany." This is the key conclusion of a study published on September 11 by the Deutsche Bank Research Center in Frankfurt am Main (DB Research).
The most skeptical is the president of the Munich Institute for Economic Research ifo, Professor Hans-Werner Sinn. In an article in the economic journal Wirtschafts Woche, he notes that "the people who are now arriving are young and want to work," but they are on average poorly educated and do not know German, so their labor productivity (at least initially) will be low.
Therefore, Professor Sinn proposes reducing the minimum wage of 8.50 euros introduced in Germany on January 1, 2015. Without such an unpopular measure, the scholar warns, "the massive influx of low-skilled people, contrary to all good intentions, will turn into immigration into unemployment."