January 24, 2017

What comes next?

We are facing a challenging year 2017. More than ever, the economic environment is affected by global economic and geopolitical uncertainties and risks.

Weaker economic development in 2017

After a successful year 2016, in which the Bavarian economy has grown about 2.5 percent, we expect much weaker growth in 2017 – 1.7 percent for Bavaria and 1.4 percent for Germany due to declining cyclical trends and three working days less than in 2016. Private consumption will continue to be the cornerstone of the economy. Given the numerous elements of uncertainty, the investment level will remain low.

Exports expected to grow unless…

The export prospects are low. For Bavaria however the vbw export index signals an export growth of 3 percent in 2017, assuming the recession in Russia and Brazil will end and there is no escalation of the numerous global economic risks. In addition to the geopolitical conflicts, the situation in Europe is again very fragile: negotiations on the Brexit, uncertainty about the future Italian government, continuing high financial needs of Greece, uncertain outcome of the presidential elections in Germany and France and fundamental disagreements within the EU put a strain on the economy.

Major challenges for the European Union

Especially for Europe, 2017 will be quite a decisive year. The result of the UK referendum has shown that the EU cannot continue the way it does. The answer to the growing Euroscepticism must not be "more Europe", but a "better Europe". This particularly includes the strict observance of subsidiarity. The EU must only regulate issues which cannot be resolved at the national level. In addition, the strengthening of economic competitiveness must be a key European goal. This requires re-industrialization.

vbw EuroIndex

The economic situation in the EU is moderately recovering – a trend that is expected to continue in 2017. In order to outline the economic development in Europe, the vbw has introduced its vbw EuroIndex (EUI). It shows both the real-economic as well as the financial progress in the EU and in the Eurozone after the debt crisis. Currently, the EUI is stagnating, after a moderate increase in 2016. While the real economy index continues to grow, the finance index has declined again.


Volker Leinweber

Volkswirtschaftliche Grundsatzfragen

Volker Leinweber