Institutes raise Germany 2011 economic growth forecast to 2.8%

07 April 2011 19:59  [Source: ICIS news]

TORONTO (ICIS)--Eight German research institutes have raised their 2011 GDP growth forecast for the country to 2.8%, mainly because of better-than-expected export prospects, they said in a joint report on Thursday.

The forecast compares with the institutes' previous 2011 GDP growth projection of 2.0% from autumn last year, and the government’s 2.3% growth forecast from January.

Growth in Europe’s largest economy would gradually shift towards domestic demand, the institutes said. For 2012, Germany’s GDP would increase 2.0%, they forecast.

Risk factors to Germany’s growth include oil prices and supplies, as well the euro zone debt crisis, they said.

“If a reduction in oil supply were to come about because of increasing unrest in the Arab countries, or if the European debt and confidence crisis were to worsen, this would have a clear effect on the economy,” they said.

The institutes also said while there would be no severe effects from the Japan disaster on the German or global economy, Japan’s production losses would be significantly higher than after the Kobe earthquake in 1995.

“It will likely take months until adequate electricity supplies will be restored and Japan can resolve its production bottlenecks,” they said.

The institutes said they expect lower unemployment in Germany to lead to wage increases this year, and went on to note the recent 4.1% wage hike in Germany’s chemical industry.

Germany’s top industrial lobby group, BDI, said the institutes’ 2011 forecast is “realistic,” but the group warned that growth rates are slowing.

BDI also said the institutes' projection of a mere 1.2% increase in Germany’s production potential offers a “rather sobering growth perspective.”

Germany is suffering from a “structural investment weakness,” the group said. The country's investments, as a share of GDP, tend to decline, it added.

However, Germany’s economics minister Rainer Bruderle said the institutes' forecast shows that the country's growth is continuing, driven by rising domestic demand while the contribution of export trade is moderating.

Germany would overcome this year the deep “growth gap” from the economic crisis, Bruderle added.

Germany’s GDP declined 4.7% in 2009 from 2008. In 2010, the economy grew by 3.6%.

In a related report, the economics ministry said on Thursday that Germany's industrial production rose by 1.6% in February from January, mainly because of growth in the country's construction industry.

In Germany’s chemicals industry, production for 2011 is forecast to grow 2.5% year on year, according to producers trade group VCI.

In 2010, chemical production increased 11.0% year on year, after declining 10.0% in 2009 from 2008.

Read Paul Hodges’ Chemicals and the Economy blog
Click here for latest news on the Japan disaster

By: Stefan Baumgarten
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