BERLIN: German growth will remain strong in the second half of this year on rising consumption and growing exports but the global outlook is clouded by the increasing risk of a big economic slowdown in China, the Bundesbank said here the other day.
The upbeat outlook comes after Germany, Europe’s biggest economy, reported solid but unspectacular growth figures on Friday, which showed gross domestic product expanding by 0.4 percent in the second quarter, shy of forecasts for 0.5 percent.
The quarter also ended on a mixed note with falling output and exports but strong investments and unusually strong industrial orders, highlighting some of Europe’s growth challenges after a protracted downturn.
Germany will benefit from huge real income increases at home, the eurozone’s recovery, the weaker euro and accelerating growth in the United States and Britain, two key trading partners, the Bundesbank said in a monthly economic report.
“The conditions appear to be there in today’s perspective to support relatively strong growth, driven by both domestic and external demand”, the bank said.
The Bundesbank also sounded an upbeat tone on Greece, arguing that the economy would gradually improve, benefiting from the bailout, tourism income and investments financed by European structural funds.
Normalized bank operations will also help the Greek economy while the previous wage and fiscal adjustments should also make an impact.
German lawmakers are due to vote tomorrow on the 86-billion-euro (US$95 billion) bailout deal. German approval is not in doubt because of the support of parties like the Social Democrats and Greens.
The Bundesbank was more cautious on China, which devalued its currency last week, raising fears its outlook is worse than earlier expected with growth at its slowest in a quarter of a century.
“The risks of a stronger economic slowdown remains high,” the Bundesbank said. “The decision of the Chinese central bank to allow the yuan to depreciate against the US dollar can be seen as evidence of the uncertainty.”
