Saturday, Sep 25, 2021
International Finance
Economy

ifo sharply increases growth forecast for 2018 to 2.6 percent

The number of people in employment is currently hitting record highs and looks set to rise from 44.3 million this year to 44.8 million next year

The ifo Institute has sharply increased its growth forecast for the year ahead. Instead of the 2.0 percent growth rate forecast to date, researchers now expect to see 2.6 percent growth in 2018. This would mark the highest growth rate seen since 2011.

“The German economy is in great shape,” says ifo President Clemens Fuest. “The impetus seen in 2017 will carry over deep into 2018.” ifo only recently upwardly revised its June forecast for 2017 from 1.8 percent to 2.3 percent. “Many branches, ranging from construction to manufacturing and distribution, are flourishing, which is why the ifo Business Climate Index is constantly hitting new record highs,” notes ifo Head of Business Cycle Analysis and Forecasts Timo Wollmershaeuser. “If the number of working days had not been so low, we could have seen growth of 2.5 percent this year.” For 2019 ifo is still forecasting a growth rate of 2.1 percent.

The number of people in employment is currently hitting record highs and looks set to rise from 44.3 million this year to 44.8 million next year and 45.2 million in 2019. At the same time, the number of unemployed will drop from its present 2.5 million to 2.4 million in 2018 and 2.2 million in 2019; while the unemployment rate will successively fall from 5.7 percent in 2017 to 5.3 percent and 4.9 percent over the following two years. According to ifo’s forecast, consumer prices will rise by 1.8 percent this year, by 1.9 percent in 2018 and by 2.2 percent in 2019.

Germany’s government surplus will continue to grow over the forecasting period. It totalled 25.7 billion euros last year and will amount to 42.1 billion euros this year, 50.6 billion euros in the year ahead and 62.1 billion euros by 2019. Given that a new government is yet to be formed in Germany, a great deal of uncertainty surrounds these estimates; and eventual changes in expenditure or revenues would increase or decrease the surplus accordingly.

Germany’s widely-criticised current account surplus will also continue to rise from 252 billion euros this year to 265 billion euros in 2018 and 278 billion euros in 2019. As a share of economic output, however the current account surplus will remain almost unchanged at 7.7 percent this year and 7.8 percent in both of the two following years.

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