IMF Country Report No. 22/229


IMF Country Report No. 22/229

Copyright Page

IMF Country Report No. 22/229



July 2022

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Germany, the following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its July 18, 2022 consideration of the staff report that concluded the Article IV consultation with Germany.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 18, 2022, following discussions that ended on May 20, 2022, with the officials of Germany on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 30, 2022.

  • An Informational Annex prepared by the IMF staff.

  • A Staff Supplement updating information on recent developments.

  • A Statement by the Executive Director for Germany.

The documents listed below have been or will be separately released.

Selected Issues

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623-7430 • Fax: (202) 623-7201

E-mail: Web:

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2022 International Monetary Fund

Press Release



IMF Executive Board Concludes 2022 Article IV Consultation with Germany


Washington, DCJuly 18, 2022: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Germany. This also included a discussion of the findings of the Financial Sector Assessment Program (FSAP) exercise for Germany.2 The publication of the Staff Report and Financial System Stability Assessment (FSSA) bundles will be followed by publication of the FSAP Technical Notes underpinning the FSSA.

Before Russia’s invasion of Ukraine, economic activity in Germany was firming up. Auto production and services activity were picking up by late 2021 and early 2022 on easing semiconductor shortages and relaxation of pandemic restrictions. The war in Ukraine has created new headwinds, including a curtailment of gas flows from Russia, higher energy prices, scarcity of key intermediate inputs, weaker external demand and confidence, and tighter financial conditions. Growth is expected at 1.2 percent in 2022 and 0.8 percent in 2023, down from 2.9 percent in 2021. Surging energy costs are reducing the current account surplus and feeding into to broad-based price pressures, with inflation expected to average 7.7 percent in 2022 and 4.8 percent in 2023.

Uncertainty is very high, with risks to the baseline growth forecast skewed downward and risks to the inflation forecast skewed upward. The greatest threat is a persistent shut-off of the remaining Russian gas exports to Europe, which could cause sizable reductions in German economic activity and increases in inflation. A prolonged war and resurging COVID-19 infections could also intensify supply chain disruptions. Persistently-high inflation and fears of a de-anchoring of inflation expectations can prompt major central banks to tighten policies faster than currently expected, potentially triggering a sharp tightening in financial conditions and corrections in asset prices. Over the medium term, a fragmentation of global economic supply chains related to the war could compound longstanding challenges related to decarbonization, population aging, infrastructure gaps, and digitalization.

In response to surging energy prices, the government is expanding income support for vulnerable households, cutting fuel taxes, and providing liquidity support to firms. However, the fiscal stance in 2022 is expected to be broadly neutral as COVID-19 relief measures are phased out. The debt brake rule is set to resume in 2023. To finance increased climate- and defense-related spending, the government has created extrabudgetary funds that are not bound by the debt brake rule. To secure energy supplies, the government is diversifying away from Russian oil, coal, and gas, establishing facilities to re-gasify liquified natural gas, and requiring operators to fill gas storage tanks before the winter.

The war has so far had limited effects on the financial sector. Overall, banks remain largely resilient to solvency and liquidity shocks. Since the last FSAP, the authorities have strengthened microprudential frameworks for banking and insurance, resolution planning, and crisis preparedness. However, low bank profitability remains a source of vulnerability, and stress tests identify shortfalls of capital and US dollar liquidity at some individual banks under adverse scenarios. Macroprudential institutions are well developed, and the authorities have tightened macroprudential policy this year. Nevertheless, house price valuations remain stretched and lending standards appear loose in certain segments.

Executive Board Assessment3

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their timely and well-designed response to mitigate the spillovers from Russia’s war against Ukraine, including proactively looking at contingency plans in the event of gas supply disruptions. Directors noted that growth is likely to be muted in the coming quarters, and that risks associated with a potential further disruption of natural gas supplies, a gloomy global outlook, and supply bottlenecks loom large. Inflation is also likely to remain elevated in the next two years, mostly reflecting the pass-through of recent increases in natural gas prices.

Directors agreed that the fiscal stance is appropriate for 2022, and the authorities’ plan to return to the debt brake rule in 2023 by ending COVID-19 and energy-related relief measures should be manageable. Given the high uncertainty, Directors called for maintaining flexibility and recalibrating near-term fiscal plans as needed if downside risks materialize.

Directors encouraged the authorities to continue to cushion the impact of any further sizable increases in energy prices via targeted and time-bound measures for vulnerable households, and generally recommended allowing the higher international gas prices to pass through to end-users to incentivize energy savings and facilitate the build-up of gas inventories. A few Directors saw merit in the authorities’ temporary subsidies for firm’s energy bills. Directors recommended allowing automatic stabilizers to operate fully and if needed consider activating the escape clause of the debt break rule for another year if downside risks materialize. Directors supported the authorities’ efforts to ensure energy security, including their plan to introduce financial incentives to encourage further voluntary gas conservation, and close cooperation with other EU countries in planning for potential gas shortages.

Directors welcomed the authorities’ ambitious decarbonization plans and their digitalization and transportation infrastructure push. They encouraged the authorities to continue investing in Germany’s growth potential and resilience, through further enhancing energy security, digitalization, innovation, labor supply and training, and social protection. Improving economic opportunities for women and migrants will also be important. Boosting green public investment is vital to tackle network externalities and crowd-in private investments in clean technologies, which can also help lower Germany’s large external imbalances. Directors urged the authorities to overcome the longstanding obstacles to ramping up public investment rapidly and decisively. To maintain the credibility of Germany’s fiscal framework, Directors generally stressed that structural increases in spending for strategic priorities should be integrated into the core budget over time.

Directors welcomed that the financial sector has weathered the challenging circumstances well. They noted the generally positive assessment of the resilience of the German banking system in the FSAP and broadly supported the report’s recommendations. Given pockets of vulnerability and structurally low bank profitability, Directors recommended continued close monitoring of the sensitivity of banks’ balance sheets to evolving risks and strengthening banks’ capital buffers as needed. Directors appreciated the progress in enhancing the microprudential frameworks for banks and the insurance sector and underscored the need to further strengthen BaFin’s operational independence and certain aspects of the overall supervisory framework. Some Directors suggested reviewing the design of the fragmented deposit insurance system. Directors welcomed Germany’s recent macroprudential policy tightening and underscored the need to add income-based measures to the macroprudential toolkit and expedite the closure of data gaps. Some Directors also encouraged activation of borrower-based instruments if appropriate. Continued strengthening of the AML/CFT framework will also be important.

It is expected that the next Article IV consultation with Germany will be held on the standard 12-month cycle.

Germany: Selected Economic Indicators, 2020–23

article image
Sources: Deutsche Bundesbank, Eurostat, Federal Statistical Office, Haver Analytics, and IMF staff calculations.

Reflects Germany's contribution to M3 of the euro area.

Real effective exchange rate, CPI based, all countries.

Nominal effective exchange rate, all countries.

Title Page



June 30, 2022


Context. The fallout from the war in Ukraine has hit the German economy before it regained its pre-pandemic GDP level, with effects running through higher energy costs, the possibility of gas shortages and broader supply disruptions, and weaker confidence. Consumer price inflation has spiked above 8 percent, largely because of energy price increases, but inflation pressures are becoming more widespread.

Outlook and risks. Growth is projected to slow to about 1.5 percent in 2022, mostly reflecting significant headwinds from the war. The recovery should pick up modestly in 2023 if energy supplies are secured, supply bottlenecks dissipate, and disruptive COVID-19 infection waves are avoided. Risks are to the downside, especially from a potential further cut-off of Russia’s natural gas exports.

Policies. The authorities’ policy response to the pandemic and war spillovers has been timely and generally well-designed. Staff’s main policy recommendations are as follows:

  • Fiscal policy. The broadly neutral fiscal stance in 2022 is appropriate under the baseline forecast. The government’s plan to tighten policy and return to the debt brake rule in 2023 should be manageable under the baseline assumptions of waning drags from the pandemic and energy prices. If downside risks materialize, however, the government should allow automatic stabilizers to operate fully and continue to flexibly provide targeted support, and if needed consider activating the escape clause of the debt break rule for another year. Looking ahead, Germany needs to invest in its own productive potential and resiliency through enhancing energy security, digitalization, life-long learning, innovation, labor supply, and social protection. Higher investment can also help lower Germany’s large external imbalances. Structural increases in spending for strategic priorities should be integrated into the core budget over time, which may require a review of the fiscal framework, including expenditure and revenue policies, and the fiscal rule.

  • Contingency planning for a gas shutoff scenario. Staff’s analysis suggests that a full and permanent Europe-wide shutoff could lower annual German GDP by 1–3 percent in 2022, 2023, and 2024, which would not be recovered later, and could raise inflation by about 2 percentage points on average. A cold winter, economic frictions, and inefficient rationing could increase these losses. Cooperation with other EU countries to prepare contingency plans for possible gas shortages is key. The authorities should clarify infrastructure needs and potential rationing plans in various cut-off scenarios, to encourage further preparation and investment. Most of the existing measures to help vulnerable households and firms cope with spiking energy costs and potential gas shortages are generally well-designed. However, tax cuts on fossil fuels and subsidies for firms’ energy bills reduce incentives to conserve energy at a critical time, and should be phased out as planned; other support facilities for firms need clear termination dates.

  • Public investment and structural reforms. Germany needs to boost public investment in energy security and decarbonization; digitalization; and transportation infrastructure. The authorities should rapidly and decisively overcome the long-standing obstacles to ramping up public investment— burdensome administrative procedures, legal hurdles, limited planning capacity, labor and material shortages, and imperfect coordination across different levels of government. Structural reforms should focus on boosting labor supply, skills, and business dynamism.

  • Financial stability. The 2022 FSAP assesses the German banking sector generally resilient to shocks, but points to pockets of vulnerability and downside risks that require close monitoring and call for some additional buffers for less capitalized banks. Given continued rapid house price gains, the recently activated capital-based measures should be supplemented with borrower-based measures, such as supervisory guidance on a loan-to-value cap. The authorities are also urged to accelerate the closure of data gaps, strengthen guidance on lending standards and add income-based measures to their macroprudential toolkit. The authorities should also consolidate the existing mandatory deposit insurance schemes into a single scheme with a government liquidity backstop.

Approved By

Laura Papi (EUR) and Kevin Fletcher (SPR)

The mission took place in a virtual format during May 9–13, 2022, and in Berlin during the following week. The team comprised Ms. Celasun (head), Mmes. Lan, Mineshima, and Zhou and Mr. Sher (all EUR), with Mr. Ananthakrishnan (MCM, head of the FSAP team) joining a subset of meetings including the concluding meeting. The mission met with officials from the Finance, Economy and Climate Action, Labor, Housing, Transport and Digital Ministries, the Bundesbank, BaFin, the Federal Employment Agency, the ECB, and EIOPA, as well as representatives from the banking sector, auto industry, trade unions, employers’ association, chamber of commerce, real estate sector, academia, credit rating agencies, and think tanks. Members of the German ED office joined the meetings. Mmes. Evio and Chen (both EUR) assisted in preparing the report.





  • A. Cushioning the Impact of Spiking Energy Prices and Supply Disruptions, and Enhancing Energy Security

  • B. Mitigating Climate Change

  • C. Ensuring a Dynamic Labor Market

  • D. Putting it all together—Fiscal Policy

  • E. Ensuring Financial Sector Stability

  • F. Governance and Transparency


  • BOX

  • 1. Digitalization of the German Economy—Status Quo


  • 1. Real Activity

  • 2. Prices and Labor Market

  • 3. Fiscal Developments and Outlook

  • 4. Balance of Payments

  • 5. Credit Conditions and Asset Prices

  • 6. Housing Market Developments

  • 7. Recent Developments in the German Banking Sector


  • 1. Selected Economic Indicators, 2019–23

  • 2. General Government Operations, 2018–27

  • 3. Medium Term Projections, 2018–27

  • 4. Balance of Payments, 2018–27

  • 5. International Investment Position, 2013–21

  • 6. Core Financial Soundness Indicators for Banks, 2016–21

  • 7. Additional Financial Soundness Indicators, 2016–21


  • I. External Sector Assessment

  • II. Selected Sanctions on Russia and Belarus

  • III. Risk Assessment Matrix

  • IV. Measures Taken to Mitigate the Impact of Higher Energy Prices

  • V. Measures Taken to Secure Energy Supply

  • VI. Germany’s Key Climate Goals and Measures

  • VII. Governance and Transparency

  • VIII. Public Debt Sustainability Analysis

  • IX. Authorities’ Response to Past IMF Policy Recommendations


Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.


Under the FSAP, the IMF assesses the stability of the financial system, and not that of individual institutions. The FSAP assists in identifying key sources of systemic risk and suggests policies to help enhance resilience to shocks and contagion. In member countries with financial sectors deemed by the IMF to be systemically important, it is a mandatory part of Article IV surveillance, and in the case of Germany it is supposed to take place every five years. The last FSAP exercise took place in 2016.


At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: