Germany raises growth forecasts for 2010 and 2011

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The German economy will grow at a rate of 3.4 percent this year and then slow slightly in 2011 as global demand ebbs, Berlin predicted on Thursday, sharply raising forecasts for Europe's top economy.

Output will expand by 1.8 percent in 2011, the government forecast. Its previous projections made in April were for growth of 1.4 percent and 1.6 percent respectively.

"Germany is again the growth motor of Europe. After a period in the fast lane, our economy is now in the overtaking lane," Economy Minister Rainer Bruederle told a news conference.

"The recovery is standing solidly on two legs: after a strong push from exports, the domestic economy is now taking off," he added.

Germany, the world's second-biggest exporter after China, suffered more than most during the downturn, as global demand for its goods dropped off sharply.

In 2009, it suffered its worst recession in six decades, with output contracting by 4.7 percent.

But the country has bounced back impressively, with exports booming, unemployment at a relatively low level and companies reporting solid profits.

"Worldwide trade expanded this year at a faster rate than we expected. Demand for German goods is especially strong in rapidly expanding developing countries such as India and China," Bruederle said.

Buoyed by the strong recovery, the country's stock exchange has gained 10 percent since the beginning of the year.

The bullish forecast will also help the unemployment situation in Germany, Bruederle said, with jobless lines expected to shrink by 190,000 to 3.2 million this year and move below the crucial three-million mark next year.

"There are currently more people employed now than during or before the crisis. That is good news," the minister said.

The increase in the projections brings Germany into line with other major economic institutes. The European Commission also forecasts 3.4 percent growth for this year.

© 2010 AFP

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