Germany: will borrow less than planned in 2013; consumers confident of economic recovery

BERLIN – The German government said Friday it will borrow less money than planned this year as low unemployment fuels a steady increase in tax income, while a closely-watched survey showed German consumers believe the economic recovery is gaining momentum.

Current plans call for new borrowing this year of 25.1 billion euros ($34.3 billion). In its monthly report, the Finance Ministry said it now “appears assured” that the government won’t need to borrow all of that.

It pointed to tax income in the year’s first 11 months and expectations of strong December revenue.

In November, the government tax take was up 3.9 per cent compared with a year earlier at 39.48 billion euros. Over the January-November period, it totalled nearly 495 billion euros, a 3.3 per cent increase.

Chancellor Angela Merkel’s new government is pledging both to avoid tax increases and to end new borrowing in 2015.

The German economy, Europe’s biggest, is expected to see growth accelerate next year after only a modest increase in output in 2013. The recovery from recession across the 17-country eurozone is also forecast to continue.

In its forward-looking survey released Friday, the Gfk research institute said its overall consumer climate indicator for January 2014 was up to 7.6 points from 7.4 points in December.

It noted that the survey showed economic expectations rose 3 points in December to 23.3 points — its fourth increase in a row and 41 points higher than the same month in 2012.

“Consumers believe that the German economy is increasingly gaining pace,” GfK said in its report.

It said that the emerging stabilization of other eurozone economies is expected to boost export prospects, but “at the moment the economy is mainly driven by domestic economy and, according to the experts, this will remain the case in the coming year.”

Earlier this week, the Ifo institute reported that German business confidence was also on the rise, fueled by a rise in companies’ expectations for the next six months.

Ifo is forecasting that German GDP will rise by 1.9 per cent in real terms next year compared with its estimate of 0.4 per cent this year.

The GfK study, based on around 2,000 consumer interviews, showed that even though there was a drop in income expectations, consumers’ willingness to make purchases rose, which also bodes well for domestic growth.