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Economists raise German growth forecast to 2.8 pct

Economists raise German growth forecast to 2.8 pct

April 7th, 2011 in News

BERLIN (AP) - A group of leading think-tanks raised its 2011 growth forecast for Germany to 2.8 percent and predicted Thursday that Europe's biggest economy, which has been lifted by strong demand for its exports, will expand by 2 percent next year.

The forecast by four prominent institutes compared with their previous prediction, made last October, of 2 percent growth in 2011.

Germany has seen an impressive recovery over the past year as surging exports into a recovering global economy were accompanied by signs of improving domestic demand.

The institutes said that they expect first-quarter growth of 0.8 percent. That would compare with less robust 0.4 percent growth in the fourth quarter, when business in construction and elsewhere was hurt by harsh winter weather.

Several factors suggest that "the expansion will remain powerful in the coming months," the economists said. They pointed to global growth, particularly in emerging economies, and the likelihood interest rates will remain relatively low.

Germany's unemployment rate should sink from last year's average of 7.7 percent to 6.9 percent this year and 6.5 percent in 2012, the think-tanks said. They forecast that inflation will spike up from 1.1 percent last year to 2.4 percent this year, before slipping back to 2 percent in 2012.

The German economy grew by a robust 3.6 percent last year, and key indicators have held up in 2011. Business confidence is around a two-decade high and industrial orders grew in January and February.

The Economy Ministry said Thursday that industrial production grew by 1.6 percent in February compared with the previous month. That followed 2 percent growth in January.

The government is due to issue a revised official growth forecast April 14. Its current prediction, dating back to January, is for 2.3 percent growth this year and 1.8 percent in 2012.