All in all, in our basic scenario trend GDP growth of around 2 ¼ % should be reached ina few years’ time, reflecting substantial medium-range momentum relative to latter-year growth rates. In terms of economic policy, this basic scenario is based on the assumption that the reforms already in force and still planned have the desired impact.
Productivity and production potential in the German economy
In our base scenario for the coming years we assume as the framework conditions for Germany that the global economy will grow through 2010 at approximately the same rate as in the past five years, that no major geopolitical risks occur, that the economic policy measures planned (company tax reform) are realized and that pay settlements keep to their generally moderate path. In this environment we would expect labor force statistics and the volume of work to expand by around ¾ % p.a., as in 2006. The factor labor would then contribute roughly half a percentage point a year towards growth.
Even on upbeat assumptions, it will probably be some years before capital delivers a contribution to growth on a par with the average of the last ten years (0.6 percentage points). The level of net investment is still so low that it will take several years of rising fixed investment to bring expansion of the capital stock into line with the rates of growth in earlier years.
Conversely, there is a good chance of total factor productivity contributing more to growth than in the past ten years (1.0 percentage points). All told, in the coming years we expect more businesses in the services industries in particular to address the issue of restructuring. In 2010 we expect a trend contribution of 1.3 % to economic growth from total factor productivity – several tenths more than in recent years.