"3x3" growth scenario for the German economy: the economy will grow by at least 3% in the three years 2010, 2011 and 2012

• In 2009/10 Roland Berger correctly predicted a V-shaped recession with rapid recovery post-crisis
• New "3x3" scenario is the continuation of the V-shape: over 3% growth forecast for 2010, 2011 and 2012
• The optimistic scenario contrasts with the "3-2-1" forecasts of German economic research institutes
• Sustained recovery will be based on the specific strengths of the European economy: the industrial base, business leaders' long-term planning and Europe's approach to diversity and difference

During the crisis, Roland Berger Strategy Consultants predicted that the recession would be V-shaped: a sharp downswing followed by an equally rapid recovery. They were right. Now they are presenting an optimistic economic scenario for the coming years based on the assumption that the strong growth seen in 2010 will continue in 2011 and 2012 at least. They predict at least 3% growth in all three years – a "3x3" scenario. This contrasts with current prognoses by German economic research institutes, who expect a slowdown from 3.6% growth in 2010 to around 2% in 2011 and 1% or so in 2012 – in other words, a "3-2-1" scenario. Roland Berger's sunny prediction is based largely on the strengths of the European management style, whose long-term focus forms the basis of German economic success.

"In our economic scenarios, we forecast a V-shaped recession very early on. In other words, a quick recovery in the world economy in 2010," says Professor Burkhard Schwenker, Chairman of Roland Berger Strategy Consultants. "We were much more optimistic than many other forecasters. And we were right."

Current forecasts by German economic research institutes remain cautious. In 2010, Germany experienced a 3.6% rise in gross domestic product (GDP). Predictions are for slower growth in 2011, of around 2% to 3%. In 2012, the recovery is expected to slow down even further, with growth of 1% or so. In other words, a 3-2-1 scenario.

Roland Berger's outlook is rather more optimistic. Burkhard Schwenker: "We were right about the V-shaped recovery and we continue to be positive about the future. The German economy is fundamentally strong – a fact reflected in our new scenario for the coming years." The international strategy consultants are predicting a 3x3 scenario: following 3.6% growth in 2010, at least 3% in 2011 and the same again in 2012.

Germany and Europe well prepared for sustainable growth

The optimistic 3x3 scenario is partly based on the conviction that, as Europeans, German entrepreneurs are well equipped for the future. In his new book, "Europe shows the way", Burkhard Schwenker analyzes the specific qualities of German and other European entrepreneurs and managers. He argues that they look at business strategically, with an eye to the long haul. They are committed to seeing their strategies through. They prioritize differentiation in their businesses, thinking in terms of products and technologies rather than focusing primarily on the interests of the capital markets. "Europeans have learned to see the world in all its variety and diversity," says Schwenker. "Americans are often seen as wheeler-dealers, looking to make short-term gains and a quick buck. Europe, on the other hand, represents a craftsman culture, one which strives for permanence. These are the values that will count."

The gloomy 3-2-1 prediction of German economic research institutes is based on the assumption that exports will slow and that domestic growth is not strong enough to compensate for this. It sees the key drivers of growth in 2010 as one-off effects – making up for deferred investments and rebuilding stocks depleted by the crisis, for example. It assumes that the German economy can no longer count on this type of driver in 2011. It also assumes that the crisis in the euro zone will put a damper on Germany's economy, a major hindrance to growth. Schwenker's response is upbeat: "These factors exist, but there are other factors that could make up for them." He argues that the restructuring of the German economy in the period up to 2005, accompanied by wage restraint and far-reaching structural reforms, was a major boost to Germany's long-term competitiveness. The German business model – a strong focus on key value-adding, system-head functions – is a roadmap that many other countries follow. "Our industrial competence is once again an international yardstick," says Schwenker. He believes that a sustainable, dynamic recovery will take place: "Germany has proven time and again that more than 3% growth is feasible – in 2000, in 2006, and again in 2010."

Factors for sustainable growth

The Roland Berger Strategy Consultants scenario analyzes the factors that could lead to sustained growth in Germany. First, there is the growth of export markets. In 2010, demand for German goods and services came primarily from the BRIC countries. This more than made up for the decrease in orders from the United States and Europe. In 2011, the situation in Europe and the US will improve and enable further growth in Germany.

Roland Berger also expects to see domestic demand pick up in 2011. Companies, consumers and the government now have more money at their disposal – and enough confidence in the recovery to actually spend it in the domestic market. Many companies have already stepped up their investment plans for 2011. The positive state of the job market is giving consumers confidence and making them feel more like spending money. The government also awash with cash. Tax revenues are rising a lot faster than expected: in 2011 and 2012, overall tax income is set to be much higher than originally thought. This money could be used to push growth even further, for instance by investing in education, research and infrastructure. Overall, then, domestic and international demand is developing fast. Optimism is called for. If everything goes as Roland Berger expects, this fresh dynamism will help Germany past the 3% growth threshold in 2011.

Schwenker is also optimistic about the third three – 3% growth in 2012. "We have gone a long way toward instituting a European insolvency code, there is backing for a coordinated raw materials and energy strategy, and Germany is well positioned for new business models, such as in the area of green tech."