As she celebrates her 10-year anniversary in office, German Chancellor Angela Merkel faces two crises. While the political fallout still is uncertain, in economic terms the positive impetus from European refugee influx is due to more than offset the negative effect of the Volkswagen emissions cheating scandal.
The expected absorption of some 800,000 asylum seekers into Germany, many fleeing the violence in Syria, will add 0.2 percentage point to annual growth next year, according to the median estimate in a Bloomberg survey of 24 economists, conducted Nov. 6-13.
The VW scandal’s impact will be negligible, lowering 2016 growth by just 0.03 percentage point. Based on the IMF’s October estimate of nominal German gross domestic product, the combined impact translates into roughly $6 billion in extra economic activity next year.