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Growth forecast of 2.8 percent confirmed by top institutes

The Local · 7 Apr 2011, 14:05

Published: 07 Apr 2011 14:05 GMT+02:00

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The economy is expected to grow by 2.8 percent this year, with the pace dropping slightly next year to 2.0 percent according to the five top institutes in their closely-watched biannual report.

This was a large upwards revision to their October forecasts for growth of 2.0 percent this year.

"In the spring of 2011, the world economy is enjoying an upswing, mainly due to positive results from emerging economies. Germany too is experiencing a strong upturn," the five organisations said in their report.

"The recovery is being driven both by external demand and by domestic consumption ... much indicates that the expansion will remain strong in the coming months," the economists added.

Unemployment in Germany is already at its lowest level since the country reunified in 1990 but the buoyant economy is poised to drive down joblessness further, with the rate seen at 6.9 this year and 6.5 percent in 2012.

"Average unemployment will be under the three-million mark in 2011," said Economy Minister Rainer Brüderle. "This is all good news."

"The clear message of the spring forecasts is that the dynamic economic upswing is continuing,” he added. “The hole that the crisis ripped in our economy will be repaired this year already, according to the institutes' projections."

Berlin is set to publish its own growth forecasts next week and is likely to raise its current estimate of 2.3 percent for this year.

The strong economy will also bring down Germany's public deficit at a time when its European rivals are battling to meet EU deficit rules.

Portugal's public finances are in such a bad state that it decided Wednesday to become the third member of the eurozone, after Greece and Ireland, to seek a multi-billion-euro bailout.

Germany's deficit should be 1.7 percent this year and shrink further to 0.9 percent in 2012.

Nevertheless, the institutes warned of clouds on the generally sunny horizon coming from the Middle East and Japan, although the economic impact of the nuclear disaster in Fukushima should be "short-lived."

Story continues below…

Andreas Rees, an analyst from Italian financial services group Unicredit, disagreed, warning that German companies could be hit hard by shortages from Japanese suppliers afflicted by the recent earthquake and tsunami.

"Some input goods from Japan might be highly complementary and cannot therefore be replaced easily," Rees cautioned.

In a further piece of positive news for Germany, official data published earlier Thursday showed that industrial production rose by 1.6 percent in February, more than three times faster than analysts expected.


The Local (news@thelocal.de)

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