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Sticking to positive growth forecast

April 20, 2016

Despite troubling global economic trends, the German government has stuck to its earlier growth expectation of 1.7 percent. Domestic strengths are believed to be overcoming international weaknesses.

Deutschland Bundeswirtschaftsminister Sigmar Gabriel PK Rüstungsexporte
Image: picture-alliance/dpa/B. von Jutrczenka

The German government is sticking to its earlier economic growth forecast of 1.7 percent of GDP for the current year, though it has slightly lower expectations for 2017, when it foresees 1.5 percent growth.

Vice Chacellor and Economy Minister Sigmar Gabriel framed the analysis in positive terms. "Germany's economic upswing will continue this year and next," the Social Democrat said at a news conference on Wednesday.

The confirmation comes despite lowered expectations for Germany's exports, which could take a hit on account of the slowdown affecting emerging economies such as Brazil, Russia and China.

In turn, economic analysts cut their 2016 growth forecast for Germany last week to 1.6 percent.

A more self-reliant economy

But Gabriel believes the slowdown in global growth is being largely offset by local trends. "Our growth model has become more domestically driven," he said. Rising employment - he's expecting a record number of people employed in Germany in 2017 - is strengthening demand, as are welfare measures such as the new national minimum wage and increased pension entitlements.

"With this, we have reduced dependencies from external risks and created the basis for stable growth even under more difficult global conditions," he said. He added that the positive trend will also help with the integration of refugees into German society.

He justified the expected slowdown in growth next year in part to domestic occurrences as well, though of the more incidental variety. More public holidays, for instance, will fall on regular workdays.

Germany: In rude good health

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Encouraging investment

But Gabriel doesn't want the German government - or the governments of other eurozone countries - to grow complacent, and stressed the need for new investments.

With too many students dropping out from its schools, Germany needs to put more money into its education system, Gabriel believes. Schools in troubled neighborhoods "have to become the lighthouses, the cathedrals in our country."

Though Germany's current coaltion has pledged to stick to a balanced budget through 2020, Gabriel sees an opportunity to fund the effort through the increased tax revenue that should result from more employment.

He also urged eurozone governments to invest more to spur growth in the bloc's stagnating economy. While not joining the chorus of German politicians deriding the European Central Bank's efforts to boost growth through a massive monetary stimulus program, he stated that "a central bank alone cannot solve the growth crisis."

jtm/sri (AFP, AP, Reuters)

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