German think tanks see economy on the competitive edge, defying recession | Business| Economy and finance news from a German perspective | DW | 19.04.2012
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German think tanks see economy on the competitive edge, defying recession

Germany's economic institutes see 2012 growth a notch higher than forecast last year on the back of robust domestic consumption and unprecedented competitiveness. Expansion is even set to accelerate next year.

Revising their growth forecast from last year, Germany's leading economic think tanks now predict economic expansion to reach 0.9 percent in 2012 - up a notch of 0.1 percent from the previous estimate.

In 2012, the country was scheduled to re-enter a more robust growth path, reaching 2.0 percent, the eight institutes said in their traditional spring estimate published on Thursday.

"The German economy is gaining momentum," Kai Carstensen, economist with the Ifo Institute, told a news conference in Berlin, citing falling unemployment and strong domestic demand as the main growth catalyst.

German companies were expected to add 470,000 employees this year and another 325,000 in 2013 to their payrolls, further driving down unemployment rates to 6.7 and 6.2 percent respectively.

In addition, wages were scheduled to rise by more than 3 percent on average, outpacing inflation of around 2.2 percent and boosting domestic consumption.

In spite of rising payrolls, Germany's corporate sector would remain on the cutting edge after reaching its "highest level of competitiveness in three decades."

Sour notes

The institutes titled their outlook "German economic upswing in the face of the simmering eurozone debt crisis" - pointing to the "main downward risk" they see looming for the nascent German recovery.

"If countries in the eurozone were to lose financial market confidence again, the German economy is bound to suffer," the report said, adding that "core problems" of the debt crisis remained unresolved.

They also criticized a "softening determination" on the part of the government to consolidate public budgets by cutting expenditure.

Nevertheless, the budget deficit is expected to fall substantially, the institutes said, from 1 percent in 2011 to 0.6 percent this year and 0.2 percent in 2013.

uhe/nk (Reuters, dpa)