BERLIN: The German economy will expand by 2.6 percent next year, the Ifo institute said on Thursday in its updated forecast for Europe’s economic powerhouse, pointing to a broad upswing that is generating record-high employment and buoyant tax revenues.
The surprisingly bullish projection – a hike from Ifo’s previous estimate of 2.0 percent for 2018 comes despite a political stalemate, with
If confirmed, the growth rate would be the highest since the 3.7 percent registered in 2011, when massive state spending followed the financial crisis and the global economic downturn.
“The German economy is humming,” Ifo head Clemens Fuest said, adding that the strong economic upturn would extend well into 2018.
“Many sectors are flourishing, from construction to manufacturing and trade, which is why the Ifo business climate index is climbing from one record high to the next,” Ifo economist Timo Wollmershaeuser said.
The Ifo institute will publish its closely watched indicator on German business morale for December next Tuesday.
In another positive sign for the economy, a survey among purchasing managers (PMI) showed on Thursday that growth in manufacturing hit its highest level in more than two decades.
“Companies appear to be just shrugging off any political worries and just focusing on the demand environment demand both at home and abroad is rising very, very strongly,” said IHS Markit economist Chris Williamson.
The Ifo institute confirmed its recently raised forecast for 2.3 percent growth this year, unadjusted for calendar effects.
“If the number of working days were not so low, we would even have a growth rate of 2.5 percent this year,” Ifo’s Wollmershaeuser said. For 2019, Ifo predicts 2.1 percent growth.
Germany’s strong domestic demand is helped by record-high employment, rising real wages and low borrowing costs while its exporters are benefiting from a global economic recovery.
