German economy continues to accelerate and the good upward momentum is expected to remain in the coming years, according to the latest forecast of the German government. According to new government forecasts, Germany’s GDP will grow this year by 2.0%, instead of 1.5%, as previously expected. That would be the best growth since 2011. For the year 2018, the forecasts were also raised upwards from the previous 1.6% to 1.9%.
But the ministry of economy noted that serious domestic consumption in Germany will lead to imports that will exceed the exports in 2017 and 2018, suggesting that net trade will not contribute to the growth of the leading European economy.
It should be borne in mind that trade has not contributed to the country’s economic growth over the past two years (in 2015 and 2016), but has also been shifted away from private consumption, government spending and the boom in construction as major engines of the growth.
Given on the dynamic domestic demand, imports will grow slightly more than exports in 2017 and 2018 and, ultimately, trade will not make any real contribution to growth. The Ministry of Economy is predicting an increase in exports of goods and services by 3.5% in this and by 4.0% in 2018, but with a stronger growth of imports, of 4.4% and 4.7%, respectively.
The ministry expects a 1.8% rise in consumer prices (inflation) this year and slowing its growth to 1.6% in 2018, which only highlights the difficulties faced by the ECB in trying to help raising inflation in the Eurozone to the target level of just under 2%.
The Economy and Energy Minister Brigitte Zypries pointed out that the German economy is doing well and that the next federal government will have to ensure that the economic upturn will continue in the future.
Germany faces weeks of uncertainty as Chancellor Angela Merkel faces tough negotiations to form the new ruling coalition after the relatively weak results for her conservative party at September’s parliamentary elections. Some economists, however, point out that the main risks to the German economy are mainly related to possible US protectionism policies, Britain’s plans for leaving the EU and possible geopolitical conflicts.