FRANKFURT: European Union economists on Tuesday trimmed their German economic growth forecasts for this year and next, but said that sound private consumption and additional public spending to integrate a record influx of migrants would continue to underpin growth in Europe’s largest economy.
Economists at the European Commission, the EU’s executive arm, said that German gross domestic product should expand by an annual rate of 1.6% both this year and in 2017. In February, they had predicted GDP growth of 1.8% for 2016 and 2017, respectively.
“Risks to the outlook include a further weakening in the external environment, while uncertainty surrounding the strong inflow of asylum seekers and its economic impact remains high,” the commission said.
It said that external trade is expected “to exert a substantial drag on growth this year and detract slightly again in 2017,” as imports are forecast to outstrip exports. Germany’s current-account surplus, however, will “remain very high,” the commission said.
It also lowered its 2016 German inflation forecast as “the dampening effect of oil prices is set to last until late this year.” Germany’s HICP inflation rate–measured according to common EU standards–is projected to rise to 0.3% this year from 0.1% in 2015, before accelerating to 1.5% in 2017. The commission had previously forecast an inflation rate of 0.5% for this year.
