Bundesbank Raises German Economic Growth Forecasts
The Bundesbank raised its growth forecasts for Germany, Europe’s largest economy, saying the outlook for the next two years has “brightened perceptibly.”
Gross domestic product will rise 1.6 percent next year and 1.2 percent in 2011 after dropping 4.9 percent this year, the Frankfurt-based Bundesbank said in its bi-annual economic outlook today. In June, it predicted the economy would stagnate in 2010 after contracting 6.2 percent in 2009.
“The outlook for the German economy has brightened perceptibly in recent months,” the Bundesbank said. The recovery is being driven by “extensive” monetary and fiscal stimulus,” it said, adding that exports, business investment and private consumption will gain in importance as those measures wane.
The economic revival in Germany is helping the 16-nation euro region shake off its worst recession since World War II, giving the European Central Bank room to scale back its emergency stimulus measures. The ECB yesterday said it will reduce its long-term lending to banks next year in an exit strategy that some economists say paves the way for eventual interest-rate increases in the second half of 2010.
“Germany fell further in the recession, so it can expect a bit more of a bounce,” said Colin Ellis, an economist at Daiwa Securities SMBC Ltd. in London. “The ECB will have to be very cautious about removing stimulus too early no faxing 1 hour payday loans. Pricing pressures are likely to remain subdued.”
Benign Inflation
The Bundesbank said German inflation will remain benign, averaging 0.9 percent next year and 1 percent in 2011 after just 0.3 percent this year. It predicted unemployment will rise to 10.1 percent in 2011 from 8.1 percent today.
It’s a “balancing act” for central banks to withdraw stimulus measures without threatening the economy, Bundesbank President Axel Weber, who also is a member of the ECB’s Governing Council, said yesterday in an interview with ARD television. “There’s no need to send a signal on interest rates at the moment” as inflation is contained, he said.
Germany’s economy emerged from recession in the second quarter and growth accelerated to 0.7 percent in the third. Chancellor Angela Merkel’s government is spending 85 billion euros ($128 billion) to stimulate activity, while demand for the country’s goods is growing as the global recovery gathers pace.
Exports will gain 4.5 percent next year and 4.3 percent in 2011, according to the Bundesbank. It predicts consumer spending will increase 0.2 percent in 2010 and 1 percent the following year.