Germany to Grow 1.5% in 2010
The German economy will continue its slow recovery with growth rates at 1.5 percent this year and 1.4 percent in 2011 while the job market remains “remarkably robust” and inflation low, the country’s leading forecasters said Thursday.
In their biannual projection for Europe’s largest economy commissioned by the government the five leading economic think tanks said a strong recovery is not in sight.
However, “there still is an upward tendency of the economy after its deep plunge in the financial crisis,” economist Joachim Scheide said when presenting the expertise at a press conference in Berlin.
Industrial orders have grown, exports are recovering, businesses are confident and they are holding on to their staff, he said. The number of unemployed — minus statistical effects — is currently almost that of fall of 2008, Scheide said.
“That comes as a surprise to almost all forecasters,” he said.
The forecast expects unemployment will drop slightly from an average 8.1 percent this year to 7.9 percent next year.
Germany’s economy shrunk by 5 percent in 2009 and experts had originally projected dramatic increases in unemployment.
The think tanks said one reason for the better-than-expected performance was the government’s decision to subsidize companies that kept staff despite lower production.
The downside is a deteriorating state of public finances, Scheide said. He projected deficits at 4.9 percent of GDP for this year and 4.2 percent for 2011.
He urged the German government to start consolidating the federal budget without hurting the recovery.
Internationally, governments have to start presenting their exit strategy from the current “very expansive economic policies,” he said. The German experts expect worldwide output will grow by 2.9 percent in 2010 and by 2.7 percent in 2011 and world trade will expand by 6.5 percent this year and next.
While economies in Asia grow at high rates, recovery in industrial nations is not sustained yet, they said.
They expect the U.S. economy to grow by 2.8 percent this year and by 2.0 percent in 2011, according to their expertise.
The European Union as a whole is predicted to only have 0.9 percent growth this year and 1.4 percent next year.
VERENA SCHMITT-ROSCHMANN, Associated Press Writer BERLIN