PRESS RELEASE - Bundesbank projection: robust upswing thanks to favourable domestic activity
Copyright: Deutsche Bundesbank, Frankfurt am Main, Germany"
The German economy's underlying cyclical trend is fairly robust. Commenting on the Bundesbank's latest semi-annual projection, the Bank's President Jens Weidmann said, "Its main driver is buoyant domestic demand, which is being bolstered by the favourable situation in the labour market and by rising household income."
According to the projection, this year's economic growth is being additionally boosted by purchasing power gains resulting from renewed falls in crude oil prices and from an expansionary fiscal policy. Foreign business, by contrast, is receiving only weak stimuli on account of the sluggish growth in world trade. "In the coming years, however, it is likely that exports will gain more traction and compensate for domestic demand, growth of which is expected to tail off somewhat," explained Mr Weidmann.
Aggregate output
Against this background, the Bundesbank's economists expect price-adjusted German gross domestic product (GDP) to rise by 1.7 % this year, with growth rates of 1.4 % and 1.6 % projected for 2017 and 2018 respectively. Here, calendar effects mask the rather uniform growth rates in working-day-adjusted terms of 1.6 % in both 2016 and 2017 and 1.7 % in 2018.
The economists report that the expected growth rates are therefore higher than the estimated increase in potential output, which has been raised slightly as a result of the higher labour‑market‑oriented migration that is now expected. Aggregate capacity utilisation in 2018 is therefore likely to be significantly higher than the long-term average.
The attendant labour market bottlenecks and higher wage growth will be mitigated by high levels of migration, particularly this year and in 2017. In terms of public finances, the previously attained sizeable surplus is likely to be largely depleted in 2016 and only just remain in positive territory for the remainder of the time horizon.
page source http://www.bundesbank.de/
