Deutsche Bank just hiked its GDP forecast for Germany because of its migration surge

Deutsche Bank hiked its GDP forecasts for Germany on Friday — in part because of the dramatic increase in migration the country is recording.

GDP will rise by 1.9% this year according to the bank’s economists, rather than the 1.7% they had been forecasting before.

That’s largely down to a 0.5 percentage point hike in their forecast for consumption, driven by low oil prices, the euro strengthening slightly and the enormous number of people arriving in the country.

Here’s what the note said:

Consumption would also receive a further boost from immigration. Given the political situation in the major countries of origin the influx of refugees will slow little from this year’s 1m-plus. However, recent legal changes will likely reduce chances of acceptance as a refugee, and force more people to return. Rough calculations based on avg. expenditures of EUR 12 000 per person/year show that consumption (private and public) could increase by some EUR 12bn. Even taking hinted public expenditure cuts elsewhere into account that could add around 1⁄2 pp to private consumption

Net migration in Germany has been surging in recent years — it was negative as recently as six years ago, but is now clearly positive, with around half a million more people coming to the country than leaving in 2014:

Hundreds of thousands of refugees and migrants, many from Syria, have already arrived in Germany via Turkey, Greece and Hungary this year, with the country taking the lion’s share of people arriving.

And it will likely be much higher than that in the coming year, since the German government is expecting an astonishing 800,000 asylum applications:

The estimate for the boost from growth is in a similar range to research institute DIW’s, which projected a 0.25 percentage point increase from migration for Germany this year.

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