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Germany's 'economic sages' lower growth forecast

November 7, 2018

The economic upturn in Germany is weakening, according to the country’s leading council of experts, who have lowered their outlook. Uncertainty about global economics was part of the group’s reasoning.

Berlin Cranes before the TV tower in Berlin
Image: Imago

The German Council of Economic Experts on Wednesday decided that previous expectations for Germany's gross domestic product (GDP), for both 2018 and 2019, had been far too rosy.

The council of five experts — known in Germany as the "Five Sages of the Economy" — said the "uncertain future of the global economic order" and demographic change were behind its decision to lower the forecast.

Notable drop in growth

  • GDP is expected to rise by 1.6 percent in 2018, rather than the 2.3 percent predicted in March.
  • A GDP rise of 1.5 percent is expected for 2019, down from a prediction of 1.8 percent growth.

A need to bolster spending

Among the actions proposed by the council to help reinvigorate the economy through increased individual spending were:

  • Abolishing Germany's solidarity tax, which is still levied on income tax as a means of covering the cost of reunification.
  • Reforming the land transfer tax and property tax as a result of the high property prices in many cities.
  • An investment in social housing and accommodation benefits.
  • Important policy decisions to address demographic change within Germany and uncertainty in the economic outlook in other parts of the world. 

Countering protectionism

The group also said it was important for the European Union to be able to oppose trends towards protectionism, including the use of retaliatory measures within the rules of the World Trade Organization. The advice comes after the US imposed tariffs on European steel and aluminum, prompting the EU to hit back with levies of its own.

Read more: Angela Merkel touts Germany's 'well-positioned' economy

Successfully concluding newfree trade agreements would also help, the experts said.

The group also recommended minimizing the effects of Brexit on both the economies of the EU and the UK.

rc/sms (AFP, dpa) 

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