April 20, 2017 / 10:27 PM / in 3 months

German economy on the up, growth to pick up in first-quarter: Finance Ministry

2 Min Read

The skyline of the banking district is pictured in Frankfurt, October 21, 2014.Ralph Orlowski

BERLIN (Reuters) - Germany's economic upswing is likely to gain further momentum in the first quarter of this year, pushing up tax revenues by more than expected, the Finance Ministry said on Friday.

"The German economy continues to be on the up," the ministry said in its monthly report, adding that recent production data, incoming orders and rising employment levels pointed to a pickup in activity in the first three months of this year.

But the ministry cautioned that the growth outlook remained clouded by political uncertainties such as protectionist threats by U.S. President Donald Trump, the unknown outcome of major elections in Europe and the course of Brexit negotiations.

"These (risks) could influence world trade as well as global investment activity," the ministry said.

The German economy grew by 1.9 percent in 2016, the strongest rate in five years, helped by soaring private consumption, higher state spending and increased construction.

In the final three months of 2016, the economy expanded by 0.4 percent, and economists expect a stronger quarterly growth rate in the first three months of 2017.

The upturn is boosting tax income as more people join the labor market, shoppers splash out and companies are able to increase their profits.

From January to March, tax revenues of the federal government and the 16 regional states rose 6.8 percent year-on-year, the ministry said. That is more than double the projected rise of 2.9 percent for the whole year.

The buoyant tax revenue has enabled Chancellor Angela Merkel's government to raise spending on roads and bridges, faster internet, social housing and integration of refugees, without taking on new debt.

This means Finance Minister Wolfgang Schaeuble can stick to his cherished but internationally criticized goal of a balanced budget -- also known as 'Schwarze Null' or black zero -- before federal elections in September.

Reporting by Michael Nienaber; Editing by Mark Trevelyan

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