Strong German economic growth set to continue, IFO says
Staff Writer | March 21, 2018
Germany's strong economic growth is set to continue in the months ahead, as demand for the country's exports are expected to improve, a leading think tank predicted.Article continues below
Gross domestic product is forecast to grow 2.6% this year after 2.2% increase in 2017, the Munich-based Ifo Institute said its Spring forecast.
The pace of growth is expected to ease to 2.1% next year. The forecasts were unchanged from Ifo's Winter forecast.
"The overburdening of capacities will increase markedly over the forecasting period, and the rise in wages and prices will continue to gain impetus," the Ifo said.
"Massive income tax cuts in the USA and a strong upturn in the euro area are pushing demand for German goods and services," the think tank noted.
That said, the debate over the introduction and/or increase in tariffs on transatlantic trade and the appreciation of the euro are weakening sentiment among German companies, the institute cautioned.
Ifo expects the new German government's economic policy to have a temporarily stimulating effect, especially plans to ramp up public transfers and expenditure programs.
However, the coalition agreement is disappointing in terms of reforming the tax and social security contribution system, the institute said, adding that it fails to offer any response to the clear reduction in corporate taxes in the USA, as well as in France and Britain.
Inflation is expected to hold steady at 1.8% this year and to accelerate to 2.3% next year.
The unemployment rate is expected to ease to 5.2% this year from 5.7% in 2017 and then fall sharply to 4.8% next year. ■ What to read next
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