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German economy seen growing even more

April 19, 2018

Germany's leading economic institutes expect the economy in Europe's powerhouse to expand slightly more than previously forecast. At the same time, experts warned of some trailing off in the mid-term.

Trainee in German company
Image: Getty Images/J.-U. Koch

In their Spring Joint Economic Forecast published on Thursday, Germany's leading economic research institutes said the EU's largest economy would grow by 2.2 percent this year and by 2.0 percent in 2019, versus 2.0 percent and 1.8 percent respectively as predicted in the fall of last year.

"The German economy is still booming, but the air is getting thinner as unused capacities are shrinking," said the head of Economic Forecasting at the Munich-based ifo institute, Timo Wollmershäuser.

He warned Germany's new government against a massive public spending spree despite the budget surplus at hand.

"It's precisely when the government's coffers are full that fiscal policy should reflect the implications of its actions for overall economic stability and the sustainability of public finances," he said.

"The extension of statutory pension benefits outlined in the coalition agreement runs counter to the idea of sustainability."

Strong labor market

Despite tax breaks and slightly higher public spending, Germany's fiscal surplus remained almost unchanged at €36.6 billion ($45.3 billion) in 2017, and is expected to hit €37.8 billion this year thanks to the economy's strong performance.

The economic institutes said the number of people in employment would increase to 44.9 million this year (up from 44.3 million in 2017), with the nation's jobless rate to drop to 5.2 percent this year (down from 5.7 percent last year.)

The Joint Economic Forecast sees consumer prices in Germany rise to 1.9 percent in 2019, which would take inflation close to the level recommended by the Central European Bank.

Brexit's impact on the German economy

hg/jbh (AFP, Reuters)