Economic forecast
January 27, 2010
The German economy will grow by 1.4 percent this year the government said on Wednesday, more than previously forecast. Berlin had initially projected a 2010 economic expansion rate of 1.2 percent with exports emerging as the key driving force behind growth after the economy shrunk by 5 per cent in 2009.
"The trough is behind us but the climb will be slow and difficult," said Economics and Technology Minister Rainer Bruederle.
The new growth forecast formed part of the government's annual economics report, which was drawn up by the Economics and Technology Ministry, and agreed to by cabinet Wednesday.
However, the report went on to say that recovery from the nation's deepest recession in more than 60 years was still fragile and warned that the jobless rate will rise from 8.2 percent last year to 8.9 percent in 2010. The jobless rate stood at 7.8 percent in 2008.
"Despite the continuing recovery, Germany hasn't yet overcome the worst financial market and economic crisis in the post war history," said the report.
Exports up but consumption down
After contracting by 14.7 percent last year, Berlin expects exports to rebound by 5.1 percent as global trade gains momentum. Imports will grow by 3.4 percent this year after slumping by 8.9 percent in 2009.
However, private consumption is expected to act as a drag on growth this year with household spending forecast to contract by 0.5 percent after growing by just 0.4 per cent last year.
The release of the report came against the backdrop of tensions within Chancellor Angela Merkel's ruling coalition over the launch of tax cuts totaling about 20 billion euros ($28.2 billion dollars).
Originally planned for 2011, Finance Minister Wolfgang Schaeuble, a member of Merkel's conservative Christian Democrat party, has raised concerns about introducing the tax cuts next year when the nation's budget could be under pressure as a result of the fallout from the recession.
However, leading figures from the junior coalition member, the business friendly Free Democrats, have insisted that the government should proceed with the tax cuts next year.
mrm/dpa/AFP
Editor: Rob Turner