Fitch Ratings - Frankfurt am Main - 15 Sep 2023: Fitch Ratings has affirmed Germany's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AAA' with a Stable Outlook.
A full list of rating actions is at the end of this rating action commentary.
'AAA' rating reflects its diversified, high value-added economy, record of sound public finances and strong institutions as reflected in the World Bank's governance indicators. The rating is also supported by Germany's position as the benchmark sovereign issuer in the eurozone, which ensures very strong financing flexibility. The record of persistent, high current account surpluses demonstrates the competitiveness of Germany's export sector and supports its net external creditor and positive net international investment position.
Fitch expects the German economy to contract by 0.4% in 2023 (from 0.1% expansion previously), as 1H23 GDP outturns were weak and sentiment and industrial indicators show persistent challenges for the rest of the year. Weaker global and China growth are having an adverse impact on the export sector, while domestic consumption is suffering from still high inflation, tighter financing conditions and reducing consumer confidence. Our current expectation is for GDP to expand by 0.7% in 2024 and 2% in 2025 in line with a recovery in private consumption and a cyclical upturn in exports and investments.
The economy is supported by a still solid labour market, although it starting to show signs of cooling. Lower job creation, together with an increasing labour force, should lead to a slight rise in unemployment in 2024-2025 (but it will stay significantly below the 2020 3.7% rate).
