German economic boom to last until at least 2020: studies

Source: Xinhua| 2017-12-15 04:38:18|Editor: Mu Xuequan
Video PlayerClose

BERLIN, Dec. 14 (Xinhua) -- Germany's economic boom will continue until at least 2020 according to several studies published independently by leading research institutions on Thursday.

"The German economy is roaring," Clemens Fuest, president of the Ifo Institute for Economic Research, told press.

The Munich-based Ifo institute raised its forecast for Gross Domestic Product (GDP) growth in 2018 from 2.0 percent to 2.6 percent. Accordingly, German growth would even surpass this year's estimated rate of 2.3 percent and record the ninth consecutive annual expansion.

"At the moment, there is no overheating yet, but we may be on the way there," Fuest said.

The Kiel Institute for World Economy (IfW) arrived at a similar conclusion, lifting its forecast for GDP growth in 2018 from 2.2 percent to 2.5 percent.

"The German economy is running at full speed," a statement by the IfW read. Given that companies were already operating at the limits of their capacity, the country was likely to enter a stage of "high expansion" during which wages and prices rise.

Stefan Kooths, director of the IfW Forecasting Center, warned, however, that while a boom "may feel good", it also contained the "seeds of crisis." Germany was increasingly at risk of a painful correction if the current trend persisted.

Nevertheless, the Halle Institute for Economic research (IWH) noted as a positive circumstance that growth was broadly-distributed across society.

IWH director Oliver Holtemoeller noted that the strong labor-market was a driving factor in promoting growth of "private incomes, consumption and construction." Additionally, German exporters were benefiting from unexpectedly strong global demand.

Ifo also expects unemployment to fall even further thanks to the boom. The Munich-based institute estimated that 45.2 million Germans would be employed by 2019, the highest-number ever measured and 900,000 more than in 2017.

Inflation is likely to rise as well according to Ifo if the German growth engine continues to fire on all cylinders. Annual price growth will reach 2.2 percent, just above the inflation goal determined by the European Central Bank (ECB).

The German government is set to reap a windfall in public revenue due to the boom. Ifo calculated that the public budget surplus would grow from 42.1 billion euros in 2017, to 50.6 billion euros in 2018, and 62.1 billion euros in 2019.

Ifo emphasized that there was still significant uncertainty surrounding these figures as it ultimately hinged on the fiscal objectives adopted by the country's next federal government. Ifo President Fuest advocated dedicating more funds towards education, infrastructure, as well as lowering taxes on lower- and middle-income earners.