German Government Raise Economic Forecast to 2.4 percent

On Monday, the growth outlook for Germany was revised upward by the government, with a forecast of 2.4 percent against the initial estimate of 1.9 percent. The adjustments were followed by a string of bullish economic data, showing the continuous peak performance level by Germany after obtaining its strongest growth rate last year since 2011. The resilient economic forecast strongly contradicts the political uncertainty by the Conservative leader Chancellor Angela Merkel as she signed a coalition agreement with the Social Democrats (SPD) for more than four months subsequent by the federal election.

The government reportedly expects that exports will pick up by 5.3 percent in 2018 as well as the imports by 5.8 percent. While employment is projected to increase by 490,000, reaching its highest record of 44.8 million laborers for this year, but jobless rate declined to 5.3 versus 5.7 percent last year. As the growth rate exceeds expectations along with the declining unemployment rate, the total tax take of the state boosted which further support high budget surplus and produced additional fiscal leeway to reduce taxes while raising government expenditure.

The senior member of the Social Democrats and the Acting Economy Minister Brigitte Zypries is scheduled to announce at a press conference on Wednesday about the outgoing government’s latest growth estimate. The ‘grand coalition’ consists of the SPD and the conservatives led Europe’s largest economy since 2013 and both parties are trying to reestablish their interrelations for another four years.

While sentiment surveys released last week presented that business confidence climbs surprisingly for the month of January, matching the record high in November. Also, the consumer attitude seems positive as it approaches a new month and rises towards its highest level from 2001. The total consumption expenditure is regarded to be the primary reason for Germany’s economic expansion due to the fact that consumers took advantage from the improved job security, increased in real wages, record-high employment and reduced borrowing costs.

The improvement led by consumers were further strengthened by the rebound in exports, pushing German economy to a calendar-adjusted 2.5 percent in the previous year. Germany would supposedly gain 2.2 percent if there are no adjustments made for lower figures of working days in 2017. In addition to it, the Ifo economic institute is slightly optimistic compared with the government, showing a forecast of 2.6 percent expansion in 2018.