Germany slashes 2019 GDP forecast to 1%

World
Europe

Berlin on Wednesday slashed its economic growth forecast for 2019, saying it now expects only 1.0 percent expansion for Germany compared with 1.8 percent previously.

After GDP growth of 2.2 percent in 2017 and 1.5 percent last year, Economy Minister Peter Altmaier predicted a slowdown "largely due to the international environment."

An uncertain Brexit outcome, trade conflicts – especially with the United States – and tax competition are weighing on the European powerhouse's prospects, he added.

Europe's economies are expected to grow by 1.9 percent on average in 2019, down from 2.1 percent in 2018 and 2.4 percent in 2017.

Altmaier's forecast confirms leaks last week to the German press and follows a 0.6 percentage point reduction in the International Monetary Fund's (IMF) outlook for Germany, to 1.3 percent growth.

But the country can continue counting on strong domestic demand, with unemployment expected to fall to 4.9 percent this year after 5.2 percent in 2018 – the lowest levels since reunification in 1990.

Meanwhile, incomes are expected to rise 4.8 percent in 2019.

"Germany is on course for growth for the tenth year in a row. It's the longest upturn since 1966," Altmaier said.

But the conservative politician, a close confidant of Chancellor Angela Merkel, said a string of reforms were needed to reduce taxes and boost future technologies like batteries for electric cars and artificial intelligence.

Ministers would bring a law before parliament "in the first half" of the year to cut taxes, Altmaier said, although he has faced resistance from junior coalition partners the Social Democratic Party (SPD).

Business and economically liberal politicians have been calling for tax reform for years as Germany's local, regional and federal governments have booked one record surplus after another, reaching 59.2 billion euros in 2018.

Source(s): AFP