Berlin's economic forecast may be too pessimistic

21st December 2006, Comments 0 comments

21 December 2006, Berlin (dpa) - A boom in German trade continued into the third quarter, federal statistics showed Thursday, as a leading magazine said Berlin was on the point of accepting that its current economic growth forecast is too pessimistic.

21 December 2006

Berlin (dpa) - A boom in German trade continued into the third quarter, federal statistics showed Thursday, as a leading magazine said Berlin was on the point of accepting that its current economic growth forecast is too pessimistic.

Europe's biggest economy has been moving into high gear as strong exports, particularly to new European Union members in eastern Europe, have seeded a revival of consumer confidence and eased Germany's fiscal deficit.

The Federal Statistics Office in Wiesbaden said July-September exports of EUR 222 billion marked a gain of 12.5 percent compared to the matching period of 2005.

Imports rose 16 percent to EUR 182 billion, mainly because of the soaring world prices of gas and oil. Imports from Russia and Norway, which supply gas to drive German factories and energy plants, rose a sharp 36 percent in value.

The exports to the 10 nations that had joined the EU in 2004 were the brightest spot in the statistics, rising 24 percent year on year to EUR  21 billion, though the 12-nation Eurozone remains Germany's principal export market.

Berlin is set to increase its forecast for 2007 German economic growth after concluding that it was taking too cautious a view, according to the news magazine Der Spiegel.

In a report released in advance of publication it said government economists would soon shift the current forecast of 1.4 percent to a corridor of 1.5 to two percent, despite concern that a hike in sales tax from 16 to 19 percent on January 1 may cramp domestic spending.

The economists at the finance and economy ministries believed any dip would be more than compensated by a rise in overall employment. They also believed the rise in the euro that has clouded the outlook would not continue.

An official growth forecast is due in late January.

Despite the upbeat signals, the Finance Ministry in Berlin sat tight Thursday in its estimate of net public borrowing for this year, placing the figure at "about" EUR 30 billion with a month to go before final figures trickle in.

Some Berlin politicians argue that net borrowing by the federal, state and local governments will end up much lower, thanks to booming tax revenues in December. The EU has already accepted that Germany's public deficits have fallen back into the permissible range.

The ministry's monthly report said the November tax take rose 8.1 percent year on year, slightly higher than forecast, but less than the October gain of 9.7 percent that impressed financial markets.

Copyright DPA

Subject: German news

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