Consumption, euro zone
recovery lift German growth: Ifo
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[June 20, 2017]
By Michael Nienaber
(Reuters) - Vibrant domestic demand and strong export growth fueled by a
recovery in the euro zone will boost growth in Germany this year and
next, the Ifo economic institute said on Tuesday, raising its 2017
growth forecast for Europe's largest economy.
"We're experiencing a first half which is so strong that the impetus
will carry on into the coming year," Timo Wollmershaeuser, head of
economic research at Ifo, said in a statement.
Ifo raised its growth forecast to 1.8 percent from 1.5 percent, adding
that risks linked to Britain's decision to leave the European Union and
the election of Donald Trump as U.S. president have receded since the
start of the year.
"We assume the Brexit negotiations between Britain and the EU will go
ahead without much turbulence, and an exit plan should emerge early on
without any major negative effects on the economic interdependence
between the EU and Britain," said Wollmershaeuser of the talks which
began on Monday.
For 2018, the institute predicts Germany's gross domestic product will
expand by 2.0 percent, up from the 1.8 percent it had predicted
"The upswing is being driven by the domestic economy, especially
construction and consumption," Wollmershaeuser added. "But now we have
industry too. The improving economies of the euro zone and the rest of
the world are significantly boosting exports."
Consumption, construction and state spending have been the main growth
drivers in Germany as exports have gradually weakened. These three
pillars of growth have been supported by a robust labor market and the
low interest rate environment created by the European Central Bank's
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People carry bags outside a shopping mall on the last day of
Christmas shopping in Berlin December 23, 2014. REUTERS/Hannibal
expects there to be 44.2 million people employed this year, an all time high,
compared with 43.6 million last year. That would be coupled with higher
inflation, reaching 1.7 percent this year and 1.6 percent in 2018, compared with
0.6 percent in 2016.
It said it expects the ECB to start exiting its bond-buying program next year as
the recovery in the euro zone firms up.
Ifo's improved outlook chimes with the projections of Germany's central bank,
which has raised its growth forecasts for the German economy to a
workday-adjusted 1.9 percent in 2017 and 1.7 percent in 2018.
Still, Economy Minister Brigitte Zypries said in a Reuters interview last week
that the government was sticking to its more cautious growth outlook for
Europe's biggest economy despite solid economic data and upbeat sentiment
The government said in April that it expected an economic growth rate on a
non-adjusted basis of 1.5 percent in 2017 and 1.6 percent in 2018.
(Additional reporting by Thomas Escritt; Writing by Joseph Nasr Editing by
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