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Germany upgrades growth outlook as recovery gathers pace

Germany upgrades growth outlook as recovery gathers pace

BERLIN, Oct 12: The German government on Wednesday sharply upgraded its growth forecast for the current year, saying that strong demand both at home and overseas was driving the ongoing recovery in Europe’s biggest economy, reports AFP. “The German economy is doing well... the good situation has gained momentum and breadth and will remain on a growth path into the coming years,” Economy Minister Brigitte Zypries said as her ministry raised its growth forecast for the current year to 2.0 percent from 1.5 percent previously. The economy would be able to keep up its momentum next year, as well, the ministry said, pencilling in growth of 1.9 percent for 2018, up from an earlier forecast of 1.6 percent. The sunnier outlook was based on “a broad-based recovery with a solid foundation in the domestic economy”, the Economy Ministry said in a statement. And faster growth in the world economy and international trade should also favour export powerhouse Germany, it added. The government economists see little slack in the German economy, with companies using a high proportion of their capacity, historic low unemployment and stable inflation. Zypries is a member of the Social Democratic SPD party, which will no longer be a partner in the ruling coalition under Chancellor Angela Merkel after it lost seats in last month’s election. Set to lose her post as economy minister, she warned that “the next government will have to make sure that things stay” in good shape. Germany’s leading economic think-tanks are slightly less confident than the ministry: in their latest economic forecasts published at the end of last month, they projected growth of 1.9 percent this year and 1.8 percent in 2018. Gross domestic product expanded 1.9 percent in 2016, powered as in previous years by rising domestic demand. A solid labour market and low inflation, as well as government spending on the more than one million migrants and refugees who have arrived since 2015 have all been factors driving the recovery. But domestic consumption could slow in 2018 and 2019, the ministry suggested, meaning that exports could resume their historically dominant role in economic growth as demand for products “Made in Germany” accelerates. The forecast upgrades from Berlin came hard on the heels of a similar upward revision from the International Monetary Fund, which also predicted the German economy would expand 2.0 percent. The Washington-based fund urged Europe’s biggest economy to invest and spend more of the proceeds of its growth at home to boost the economies of neighbours in the 19-nation eurozone. But Germany’s next government looks set to be dominated by fiscal conservatives following elections in September, as Chancellor Angela Merkel’s centre-right Christian Democrats open coalition talks with the pro-business Free Democrats and the environmentalist Greens.

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