German government raises 2016, cuts 2017 growth outlook

BERLIN – The German government on Friday raised its economic growth forecast for this year slightly to 1.8 per cent but snipped next year’s outlook to 1.4 per cent.

Vice Chancellor Sigmar Gabriel, who is also Germany’s economy minister, raised the 2016 forecast from the 1.7 per cent the government forecast in April. The 2017 outlook was down from 1.5 per cent, while Gabriel forecast that the economy will grow by 1.6 per cent in 2018.

Gabriel said that a large number of public holidays weighs on next year’s outlook, but also noted that “the global economy still isn’t running smoothly.”

“On top of that come the effects of the Brexit decision, which in many areas are not yet foreseeable, but you can image that the uncertainty alone about how it will happen causes uncertainty regarding investment,” he said.

Germany’s economy, Europe’s biggest, is traditionally export-heavy though it has increasingly been driven by domestic demand in recent times. Britain, a significant trading partner, voted to leave the European Union in June but hasn’t yet initiated formal exit talks.

“In the short term, the effects on the German economy appear to be limited. They are smaller than many expected, but there is no doubt that Brexit isn’t a good decision for Germany and Europe, and for Britain too,” Gabriel added. “It will have medium-term effects on economic relations.”

The minister pointed to “a fairly dangerous global trend toward more protectionism and nationalism.”

Recent German data have painted an encouraging picture. Earlier Friday, the Economy Ministry said that industrial production rose 2.5 per cent in August over July — helping alleviate fears of a slowing economy in the third quarter. That followed a 1.5 per cent drop the previous month.

Last year, the economy grew by 1.7 per cent.