The export-based German economy is likely to benefit from the global upturn, with exports expected to increase sharply and investment in machinery and equipment expected to rise from their current low levels. Moreover, the full impact of the government infrastructure programme should be felt eventually. However, private consumption is not expected to provide stimulus given that unemployment will likely keep rising. GDP growth is projected to be higher than in the euro zone (The German Council of Economic Experts: 1.6%, Postbank Research: 2.2%).

It is unlikely that the price of oil will reach the lows of 2009 or the highs of 2008. We estimate that the average price of oil for the year will be higher than in 2009.

For the time being, it is expected that the US Federal Reserve will leave its key interest rate at the current extremely low level. Should the economy recover, interest rates could rise slightly starting this summer. The ECB will presumably leave its key interest rate at 1% for a longer period. Later in the year, it could tighten its monetary policy depending on the economic trend.

Capital market interest rates are likely to rise on the whole. However, yield spreads are expected to remain tight assuming that price stability remains high.