The German government on Wednesday raised its 2014 growth forecast and pledged to foster domestic investment and consumption, in a move that could cut the country’s reliance on its internationally criticised export surpluses.
The economics ministry predicted gross domestic product to increase 1.8 per cent in 2014, up from an October forecast of 1.7 per cent and well ahead of last year’s sluggish 0.4 per cent. For 2015, the ministry forecast a further 2 per cent increase.
Sigmar Gabriel, the economy and energy minister, said that the economy was “in good shape”, but warned of “significant challenges” ahead, including energy reform, infrastructure renewal and raising wages in low-paid jobs.
German industry cautioned against excessive optimism. Markus Kerber, managing director of the BDI employers’ organisation, argued that the improvement over last year is not as good as it looks because of “a statistical overhang” of 0.5 percentage points of GDP – growth that should have been recorded in 2013 but was not.
Mr Kerber added: “The government has the capacity to make higher growth possible. To do that, it must remove the uncertainties from the investment calculations of entrepreneurs and not impose new burdens on business. This is especially true for the implementation of the energy reforms.”
The forecast is driven by a predicted sharp turnround in investment, from a 2.2 per cent drop last year to a 4 per cent rise. Construction is expected to rise by 3.2 per cent and household consumption by 1.4 per cent.
Unemployment will fall from 6.9 per cent to 6.8 per cent, a move which suggests that the competition for skilled workers will increase, raising the pressure on employers to recruit immigrants, despite public concerns about the costs of immigration.
The US and other trade partners who have pressed Germany to reduce its export surpluses are unlikely to be satisfied with the report, as shipments overseas are predicted to rise 4.1 per cent. With imports expected to rise 5 per cent, officials are forecasting a decline in the current account surplus – but only of 0.1 per cent.
That would make only a small dent in last year record trade current account surplus of €201bn, including a record trade surplus of €198.9bn.
Mr Gabriel emphasised the role of increasing domestic demand, saying that this would support GDP growth in 2014 and 2015. “The dynamism of Germany’s domestic economy is not only good news for Germany, it is good news for our partners in Europe. In this way we are reaching our aim of reducing the economic imbalances in the eurozone.”
He forecast that the planned €8.50 an hour minimum wage and proposed increases in infrastructure investment would help.