German central bank raises growth forecast

11th June 2010, Comments 0 comments

Germany's central bank raised on Friday its forecast for German growth this year and next as the biggest powerhouse in Europe cashes in on gradual global recovery.

The Bundesbank said in its twice annual outlook that it expected German gross domestic product (GDP) to expand 1.9 percent in 2010, instead of by 1.6 percent it had expected in December.

Next year, the economy is seen as growing 1.4 percent, against the 1.2 percent previously tabled.

"The main drivers will initially be exports and stimuli from the inventory cycle, whereas the importance of government stabilisation measures will gradually wane," the Bundesbank said, referring to stimulus efforts taken to fight Germany's worst recession since World War II last year.

"In the medium term, business investment will pick up, and private consumption, too, is likely to increase again."

The Bundesbank said that it saw the risk to German economic growth posed by fears over other eurozone countries defaulting on loans was "limited".

"However, this depends on credible measures being taken to achieve sustained fiscal consolidation," it said.

"Apart from that, it is conceivable that the German economy could benefit from the global recovery to a greater extent than is assumed here."

© 2010 AFP

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