Public investment in Germany continues long-term downward trend - reversal not before 2016

Frankfurt am Main (ots) -

- Public investment fell again in the first half of the year
- Approved additional government expenditure gives reason to hope
for tangible increases next year
- Refugee influx causes investment needs to rise further

Public investment in Germany is down again. In the second quarter
of 2015 it dropped by 2.4 % on the previous quarter, after already
falling slightly by 0.1 % in the first quarter. The expansion of
public investment approved in the course of the year by the Federal
Government in particular is not yet reflected in the figures and
should appear in the second half of the year at the earliest. Whether
this will be sufficient to bring the result for 2015 as a whole into
positive territory, following the weak first half-year, is doubtful.
In the current KfW Investment Barometer, KfW Research expects the
negative trend in public investment to reverse next year at the
earliest, recording the first tangible increase since 2011.

The multi-year decline in public investment activity is
particularly pronounced in the construction sector. Adjusted for
prices, public sector construction, which accounts for more than half
of public investment, is a good 15 % lower than in the year 2000.
This is primarily caused by the long-term decline in investment by
municipalities, which bear a large portion of infrastructure
investment. Within 15 years the municipalities' share in public
investment in construction has dropped by 7.5 percentage points to
now 55 % - just slightly above the low of 5 2% recorded for all of
Germany in 2012.

"Policymakers have recognised the need for action. The EUR 10
billion programme announced by the Federal Government for additional
investment in transport infrastructure, energy efficiency, high-speed
internet and urban renewal and development is a step in the right
direction", said Dr Jörg Zeuner, Chief Economist of KfW Group. "The
announced financial support for municipalities, such as for child
daycare or social housing, can free up funds for investment."
Sustainable state and municipal finances are important in order to
operate and maintain the new or modernised infrastructure in the long
term, he commented. Zeuner added that the reform of the fiscal
relations between the Federal Government and the state governments,
which is to be completed by the end of 2019, can make a valuable
contribution to achieving this.

"The investment needs for housing and integrating those refugees
who remain in Germany will further increase, especially in the
municipalities", Zeuner said. The local administrations, particularly
the local building authorities, must have the capacity to meet this
challenge. "This is where further action is needed because the
planning capacity of municipalities, measured by the number of
personnel assigned to construction and housing, has fallen by almost
10 per cent in the past three years."

The latest KfW Investment Barometer is available for download at
www.kfw.de/investbarometer.

For further information:

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Nathalie Cahn
Telefon: +49 (0)69 7431 2098
nathalie.cahn@kfw.de

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60325 Frankfurt

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