Central bank hikes German growth forecast to around 3.0 pct

19th August 2010, Comments 0 comments

The German economy, Europe's biggest, should grow by 3.0 percent this year, the central bank said on Thursday, raising a previous forecast of 1.9 percent following record second quarter growth.

The Bundesbank said more than half of the decline in production that stemmed from the global economic crisis has now been made up due to favourable conditions both at home and abroad.

In 2009, the German economy contracted 4.7 percent, its worst recession since World War II.

This year could see the strongest expansion since 2006 however, the central bank said in its monthly report for August.

In the second quarter, the economy expanded by 2.2 percent from the previous three-month period for the strongest quarterly increase since the country was reunified in late 1990.

"The outlook for the current year remains favorable, even if there are signs for a slowing of global production activity and trade," the report said.

"The overall trend of the German economy is positive and the upswing ought to continue," it added, citing increasing investment by domestic firms and growing private consumption.

Meanwhile, there was only a low risk of a second recession in the United States, the report said.

US business investment has started to pick up faster than during previous recoveries, which should also underpin employment and consumption, it said.

- Dow Jones Newswires contributed to this story -

© 2010 AFP

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