Positive Outlook

Solid Growth Seen in Germany

main 42916624 source Elisabeth Rahe DPA – Berlin shoppers shopping mall spending consumers economy economic growth GDP
As Germany keeps creating new jobs, consumers keep spending money and supporting economic growth. Source: Elisabeth Rahe / DPA

Germany’s economic forecasts are looking a little rosier than they did just a few months ago: The Council of Economic Experts, a government advisory body, on Monday forecast the economy will grow 1.4 percent this year and 1.6 percent in 2018 in real terms.

That would be a step down from last year when Germany’s economy, Europe’s largest and the world’s fourth-biggest, expanded by 1.9 percent. But the forecast is up 0.1 percentage point from the council’s last forecast in November.

“This development is driven by the ongoing good situation on the German labor market, a slightly more positive outlook for the global economy, a pro-cyclical German fiscal policy, and the ECB’s very expansive monetary policy,” the council said in a statement.

The advisory body, which also issues policy recommendations, called on the European Central Bank to start winding down its bond-buying program, which has totaled more than €1.5 trillion so far, as soon as possible.

It also rejected criticism that Germany’s current account surplus was too high, though it did suggest some steps could be taken to reduce it.

“Although the German current account surplus is high, it does not signal a macroeconomic imbalance,” the council’s chairman, Christoph M. Schmidt, said in a statement. “The German government should improve Germany’s appeal as an investment location, which subsequently would contribute to reducing the surplus.”

The Trump administration has repeatedly criticized Germany’s high trade surplus and threatened import tariffs on carmakers. Peter Navarro, the head of President Donald Trump’s new National Trade Council, told the Financial Times in January that the euro was like an “implicit Deutsche Mark” whose low valuation gave Germany a competitive advantage over its main partners.

German Chancellor Angela Merkel and other officials have rejected the suggestion that their country is manipulating the euro currency.

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