German think tanks lift growth forecasts for 2017, 2018

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Germany's leading economic think tanks upgraded growth forecasts for 2017 and next year on Thursday, as Europe's largest economy basks in increased consumption, exports and investment untroubled by Brexit or Donald Trump.

Gross domestic product (GDP) should grow by 1.9 percent this year and 2.0 percent in 2018, experts at the DIW in Berlin, Ifo in Munich, IfW in Kiel, IWH in Halle and RWI in Essen predicted in their autumn forecast.

Potsdamer Platz in Berlin. /VCG Photo

"The upswing in the German economy has gained in strength and breadth" since the spring edition of the study, the economists said, with domestic and export demand powering growth and adding 0.4 percentage points to the 2017 forecast.

"The strong global economy and especially the continuing upturn in the eurozone are stimulating exports," the economists found. Appreciation of the euro against other currencies, making German goods less competitive in countries outside the 19-nation bloc, would only have a limited braking effect, they said.

Meanwhile, Reuters reports, citing economic institutes, that the next German coalition government can count on record budget surpluses over the next two years and should use this fiscal room to lower income taxes and social welfare contributions.

VCG Photo‍

"Indications are that this year's overall state budget surplus will rise from 26 billion euros to 28 billion euros,"
the economic institutes said in their joint forecast.

The surplus of all state levels - including federal government, regional states, municipalities and social funds - is projected to soar to 37.3 billion euros in 2018 and to 43.7 billion euros in 2019, they added.

The institutes said Germany should utilize the additional fiscal room to improve the economic conditions and reform the tax and welfare system, especially to help low- income workers.

Source(s): AFP ,Reuters