The economy's soft infrastructure and stable fiscal picture contribute to its creditworthiness despite the deteriorating regional economic backdrop.
Germany, one of only three eurozone climbers in ECR’s rankings since Q1 2012 (alongside Greece and Slovakia), is now among the top-10 safest sovereigns in ECR’s global universe of 186 countries, narrowing the points-gap to 8.1 with top-ranking Norway – from 9.1 in January.
On a score of 83.1, Germany is now 14.2 points higher than the eurozone average, compared with a 12.4 point differential in January, and its improvement in the rankings has seen the sovereign move above Hong Kong, Australia and New Zealand.
Germany has defied the large downgrades seen elsewhere in the eurozone, in spite of lower scores to nine out of 15 sub-factors. Only Germany’s soft infrastructure – the health of its economic, medical and cultural/social institutions – has been awarded a higher score since Q1 2012.
Scoring 7.1 (down 0.1 since Q1 2012), bank stability risk in Germany is higher than that for Finland, Luxembourg, Slovakia and the Netherlands, reflecting perhaps considerable exposures, but it is still considered relatively benign in a eurozone context.
Interestingly, Germany scores lower than the Netherlands (has slightly higher perceived risk) for most other economics sub-factors, including government finances, illustrating its larger public debt burden despite a smaller budget deficit.
The economic-GNP outlook is an exception. The latest (July 2012) Euro Zone Barometer survey from MJEconomics – a firm that collects the forecasts of experts from around the region – predicts that Germany’s real GDP will grow by 0.9% in 2012, in contrast to an outright decline of -0.8% for the Netherlands.
Germany, although hit by weakness in the global industrial sector – its production is expected to decline slightly this year – has a comparatively favourable outlook, with low unemployment.