German government predicts slightly higher growth this year | Business| Economy and finance news from a German perspective | DW | 25.04.2013
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German government predicts slightly higher growth this year

The German government's latest growth forecast for the domestic economy suggests a marginally faster expansion than thought previously by Berlin. Yet predictions remained cautious with the euro crisis far from over.

German Chancellor Angela Merkel's coalition government of Christian and pro-business Free Democrats announced Thursday that it expected Europe's largest economy to grow by 0.5 percent this year, marking a slight revision from the 0.4 percent penciled in its previous forecast.

At the same time, Berlin stuck to its prediction that the domestic economy would expand by 1.6 percent in 2014.

"We can look to the future with optimism," German Economics Minister Philipp Rösler announced via Twitter shortly before an official presentation of the latest outlook. "The economy is picking up, and unemployment is falling," he added.

The minister told reporters that Germany's unemployment rate was likely to drop to 6.6 percent on average in 2013, down from the 7.3 percent recorded in May.

But a number of recent forward-looking indicators, including the closely-watched business climate index by the Munich-based Ifo research institute, have prompted some analysts to wonder whether growth targets can really be met.

Trying to be realistic

The government said its forecasts were mindful of the uncertainties that are still hampering many of Germany's European trading partners which are trying to escape recession.

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Think tanks: German economy back on track?

In point of fact, Berlin's predictions were more cautious than those of other major players. Germany's four leading economic think tanks said in their annual spring report the economy would grow by 0.8 percent throughout the current year and by 1.9 percent in 2014.

The research institutes assumed Europe's powerhouse would gather momentum in the months ahead, starting from sound level because the nation had been able to avoid the recession that the sovereign debt crisis had pushed many others into.

The International Monetary Fund (IMF) was also slightly more optimistic than the government by anticipating 0.6-percent growth for Germany this year.

hg/ipj (AP, Reuters, AFP, dpa)

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