Berlin upgrades economic forecast | Business| Economy and finance news from a German perspective | DW | 26.04.2017
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Berlin upgrades economic forecast

The German government has raised its growth outlook for 2017. It said strong domestic consumption would increase growth and bring down a much-criticised trade surplus logged by Europe's powerhouse for years on end.

The German government on Wednesday raised its growth forecast for 2017 to 1.5 percent, with a robust job market and solid domestic demand helping to offset the impact on Europe's biggest economy of a slew of global uncertainties.

Germany's economy should expand by 1.5 percent this year before accelerating to 1.6 percent in 2018, German Economics Minister Brigitte Zypries said, adding to optimism about the outlook for the nation's economy.

In January, Berlin had forecast a growth rate this year of 1.4 percent. The 2018 projection is unchanged at 1.6 percent. "The German economy is growing steadily and remains on a growth path, despite an uncertain global environment," Zypries said. "The labor market's good performance combined with a strong employment structure has helped to ensure a solid domestic economy," she said.

The government is also expecting a pickup in German exports and a modest gain in corporate investment. While unemployment is forecast to continue to fall, the government expects companies to step up hiring, resulting in employment growing to 44.4 million by 2018, 2 million more than in 2013. The government thinks Germans are likely to enjoy further increases in their pay packets, consequently encouraging consumers to open up their wallets and spend.

Trade surplus expected to shrink

Private consumption should expand by 1.4 percent this year and next, the report said, which was drawn up by both the Economics and Finance Ministries. German exports are forecast to grow by 3.3 percent in 2017 and 3.8 percent next year, while imports will grow "somewhat more strongly." The government economists expect a reduction in Germany's trade surplus to 7.3 percent of gross domestic product in 2018, a full percentage point lower than the 2016 figure.

The expected shrinking of Germany's surplus - which has arisen because it exports more than it imports - is due to demand from firms and consumers at home growing faster than the world economy and global trade.

Longstanding grumbles from European neighbors and the US about Germany's export prowess have flared up since Donald Trump took office. Elected on an "America First" platform of bringing jobs back to the United States, Trump has refused to reaffirm multilateral commitments to fight protectionism and accused Germany of exploiting a weak euro to sell its goods abroad at knock-down prices.

"Excessively large trade surpluses... are not conducive to supporting a free and fair trading system," the US leader's Treasury Secretary Steven Mnuchin said after a meeting of G20 finance ministers in Washington Friday.

German Finance Minister Wolfgang Schäuble acknowledged that the relatively weak euro has helped German exports, but blamed the low interest rates and other extraordinary stimulus measures by the European Central Bank to boost the euro area's sluggish economy.

bb/hg (dpa, AFP)

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