The German central bank or Bundesbank yesterday said that it was upbeat about the outlook for expansion in Europe’s biggest economy, upgrading its growth forecast for 2017.
“The Bundesbank’s economists expect Germany’s real gross domestic product [GDP] to grow by 1.7 percent this year, followed by a rise of 1.8 percent next year and 1.7 percent in 2017,” the central bank said in a statement.
The forecasts for this year and next year are unchanged from the bank’s earlier projections, while it had been penciling in growth of 1.5 percent for 2017.
“The German economy is currently following a growth path that is primarily underpinned by domestic demand,” the statement said.
“The main drivers are the favorable labor market situation and substantial increases in households’ real disposable income, though foreign trade is currently being hampered by frail demand from the emerging market economies,” Bundesbank President Jens Weidmann said.
“But with export markets outside the euro area expected to rebound and economic growth within the euro area gaining a little more traction, the healthy underlying state of the German economy should stand out even more clearly over the next two years,” he said.
Despite the expansionary effect which migration was having on the labor supply, “the labor market would experience shortages to a growing extent, driving up wage increases,” the statement said.
Turning to the outlook for public finances, the central bank said Germany’s general government budget was expected to post “a higher surplus in the current year and record a more or less balanced fiscal outcome next year and in 2017.”
Meanwhile, France’s central bank yesterday lowered its economic growth forecasts for next year to 1.4 percent from a previous estimate of 1.8 percent and for 2017 to 1.6 percent from an anticipated 1.9 percent.
At the same time the Banque de France kept its growth forecast for this year at 1.2 percent.
“The outlook for a pick-up in activity and inflation remains subject to downside risks,” the bank said in a statement, adding that the downward revisions were due to a slowing in global economic growth and potentially weaker business investment than expected.
Separately, Finland’s economy contracted in the third quarter as exports declined. GDP shrank 0.5 percent, according to data from Statistics Finland in Helsinki. Adjusted for working days, economic output fell 0.2 from a year earlier.
Finland is struggling to avoid a fourth year of contraction as the government cuts spending and raises taxes to avoid debt from swelling. The country has been hit hard as key industries such as papermaking and consumer electronics suffer and export demand from Russia slides.
Finnish exports fell 0.7 percent last quarter, while imports rose 1.8 percent. Private consumption grew 0.8 percent.
Additional reporting by Bloomberg
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