April 17, 2018 / 8:26 AM / 7 days ago

IMF, economic institutes raise their forecasts for German growth

BERLIN (Reuters) - The International Monetary Fund on Tuesday raised its forecast for German economic growth, predicting a healthy 2.5 percent expansion for Europe’s biggest economy this year.

FILE PHOTO: A woman carries her shopping bags in downtown Hamburg, Germany, January 25, 2018. REUTERS/Fabian Bimmer/File Photo

The forecast represents an increase of 0.2 percentage points from the IMF’s January projection. For 2019, the IMF expects a calendar-adjusted growth rate of 2.0 percent.

The upbeat assessment by the Washington-based IMF follows a string of weaker-than-expected economic data and sentiment surveys that suggested a muted start to 2018.

Last year, the German economy grew 2.2 percent which translated into a calendar-adjusted 2.5 percent. That was its strongest growth since 2011.

Germany’s leading economic institutes are also planning to raise their growth forecast later this week, two sources familiar with the deliberations told Reuters on Tuesday.

The institutes expect the German economy to expand 2.2 percent this year, up from previous estimates of 2.0 percent, the sources said. For 2019, they foresee growth of 2.0 percent.

The German government, which relies on the institutes to calculate its own estimates, will update its growth forecast next week. The institutes will announce their revised growth figures on Thursday.

The German government said in January it expected the economy to expand by 2.4 percent this year.

The institutes had also initially estimated the economy would grow by 2.4 percent this year, the sources said. But they lowered that to 2.2 percent after weak economic data in the first quarter.

German industrial orders fell in January and rose by 0.3 percent in February amid weak domestic demand. Industrial output fell the most in more than two years in February, as industry lost some of its momentum in the face of the rising threat of protectionism.

Adding to signs that the economy was losing steam, exports fell unexpectedly in February, posting their biggest monthly drop in two years and narrowing Germany’s trade surplus.

Despite the weak data, economists and the government expect the economy to rebound in the spring.

Buoyant tax revenues, a record budget surplus, falling unemployment and low borrowing costs have fueled a consumer-led upswing in Germany.

Writing by Joseph Nasr, editing by David Goodman, Larry King

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