Bundesbank Raises German Growth Forecasts – German Growth Forecasts - Arhive

Gross domestic product is set to grow 1.8 percent this year, which was slightly faster than the 1.7 percent expansion predicted in June, the bank said in its semi-annual economic projection.

Growth will continue at 1.8 percent next year, which was much stronger than 1.4 percent seen in June. The bank retained the projection for 2018 at 1.6 percent and predicted 1.5 percent expansion for 2019.

The highly favorable setting for household consumption at present looks set to turn slightly gloomy in the years ahead as demographic constraints soften employment growth and higher rates of inflation, mainly led by energy prices, erode consumers’ purchasing power, the bank said.

Exports are likely to continue to be held back by muted growth in global trade next year, but should slowly gather steam as the markets for German exports improve, the bank added.

“But this is unlikely to fully offset the slight downturn in domestic activity,” Bundesbank President Jens Weidmann said.

The bank nudged up the harmonized inflation forecast for this year to 0.3 percent from 0.2 percent. The outlook for next year, however, was cut to 1.4 percent from 1.5 percent.

The inflation projection for 2018 was retained at 1.7 percent and a higher figure of 1.9 percent was forecast for 2019. Inflation is expected to accelerate in these years as labor costs then projected to pick up more strongly, the bank said, adding that consumer prices could rise further than projected, particularly in 2017.

“The risks to projected economic growth appear balanced overall,” Weidmann said.

The German government was forecast to run a moderate budget surplus across
the entire projection horizon, the report said.
Source: RTT