BERLIN: Leading German think tanks on Wednesday raised their growth projections for Europe’s largest economy due to strong exports and investment spending.
They forecast growth of 1.5% in 2017, compared with September’s prediction of 1.4% and after 1.9% growth posted in 2016. Germany’s economic growth rate is expected to accelerate to 1.8% in 2018, compared with an earlier estimate of 1.6%.
“The German economy is already in the fifth year of a moderate upturn. Overall economic capacity utilisation is gradually increasing,” the Munich-based Ifo institute, the Essen-based RWI, the DIW in Berlin, the IWH in Halle and the IfW in Kiel said in a joint research report.
“Private consumption expenditures will expand less markedly during the forecast period. On the other hand, exports are gaining momentum. Their dynamics benefit from an improved global economic environment and the depreciation of the euro. Investment spending should again contribute more to the increase in economic activity.”
Thanks to the strong economy, Germany’s unemployment rate will fall to 5.7% this year, from 6.1% in 2016, and to 5.4% in 2018, they forecast.
The predictions come as Germany is heading to the ballots this September, which Chancellor Angela Merkel hopes to win amid a strong economic track record and by pledging tax cuts.
The think tanks forecast continued solid public finances with the national budget surplus seen falling only slightly to 19.2 billion Euros or 0.6% of gross domestic product, this year from EUR23.7 billion or 0.8% in 2016. For 2018, they forecast a surplus of EUR17.4 billion or 0.5% of GDP.
Germany’s current-account surplus, a broad measure of its foreign trade and investment balance, will fall slightly. The institutes expect it to fall to 7.8% of GDP this year, after 8.3% in 2016, and to drop to 7.7% in 2018.
