Germany’s 2010 GDP growth forecast boosted to 3.4%

09 September 2010 15:51  [Source: ICIS news]

TORONTO (ICIS)--Germany’s economy is forecast to grow 3.4% for the full 12 months of 2010 after an “exceptional” second-quarter performance, a leading research institute said on Thursday.

The Kiel Institute for the World Economy lifted its forecast for Europe’s largest economy from an earlier 2.1% growth projection.

The institute said German exports were booming in past months, with volumes close to their pre-crisis levels.

However, despite “the surprisingly good performance” in recent months, there was still a significant production gap of 3% compared to the pre-crisis situation and Germany's capacity utilisation was not yet back to “normal levels”.

“Neither the steep rise in labour productivity nor the increased per capita numbers of hours worked in the industries most heavily affected by the crisis was strong enough to compensate for last year’s losses,” the institute said.

German GDP would continue to grow in the third quarter, but growth would lose some momentum as export trade would slow down.

“As the recovery process in most of the major German trading partners has passed its peak, external trade will no longer stimulate production,” the institute said.

Some of Germany’s trading partners were even facing a significant slowdown, it added.

In addition, “substantial risks” remained as financial markets were far from restabilisation.

“Monetary policy has little room for even more expansionary interventions and fiscal policy makers face high and still strongly increasing public debt in many countries that might give rise to new waves of confidence crises,” the institute said.

The Kiel forecast compared with a 3% growth projection by Germany’s federal bank, the Bundesbank.

In Germany’s chemical industry, the latest forecast is for 11.0% chemical production growth in 2010. The growth would come after a 10% decline in 2009 from 2008.

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