International Finance

Ifo Institute expects higher GDP growth in Germany

The ifo Institute has increased its economic forecast for 2017 and 2018 significantly, and it is expecting new record highs in employment. For the current year, it now expects 1.8 percent GDP growth instead of the previous forecast of 1.5 percent. In the coming year, it should amount to 2.0 percent, topping the 1.8 percent of the last forecast. “The German economy is strong and stable. We are currently experiencing such a strong first half-year that the momentum will carry us into the coming year,” commented Timo Wollmershäuser, Head of ifo economic forecasting. “As in previous years, the upturn is being driven by internal demand, especially by the construction industry and by private consumption. But now the dynamism spreads to manufacturing. The upswing of the economy in the euro area and the rest of the world is boosting exports. In the ifo Business Survey, firms’ business expectations are at the highest level since 1990.”

According to the forecast, the number of persons employed is expected to increase from 43.6 million in 2016 to 44.62 million this year and to 44.6 million in year to come, to the highest level ever. The number of unemployed will decline from 2.7 million last year to 2.5 this year and to 2.4 million in the coming year. The unemployment rate will fall from 6.1 percent to 5.7 percent this year and to 5.5 percent in 2018. Prices, however, will increase clearly more strongly than before. The inflation rate will jump from 0.6 percent to 1.7 percent this year and to 1.6 percent in the coming year. The budget sur-plus will decline from 26.4 billion euros to 19.1 billion in this election year but will then increase again to 22.9 billion euros in 2018.

 The surplus of the current account (exports minus imports of goods, services and transfers), the subject of harsh international criticism, will increase in absolute figures from 261 billion to 265 euros in 2017 and to 279 billion euros in 2018. Its share of economic output, however, will remain largely stable at around 8.3 percent.

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