* German government raises 2014 growth forecast to 1.8 pct
* High current account surplus should fall this year
* Private households will spend 1.5 pct more this year-GfK
By Michelle Martin
BERLIN, Feb 12 German economic growth will
gather speed this year as domestic demand strengthens, but
foreign trade will weigh on the export-oriented economy for a
second straight year, the Economy Ministry said on Wednesday.
Europe's largest economy, which grew strongly during the
early years of the euro zone crisis but has since slowed, will
expand by 1.8 percent this year, the ministry said in its annual
report. That is more than four times faster than in 2013.
Berlin had previously forecast growth of 1.7 percent for
Shipments abroad will climb by 4.1 percent, after a subdued
performance in 2013. Imports will rise even more - by some 5.0
percent - so foreign trade will deduct 0.1 percentage points
from gross domestic product (GDP) growth, the ministry said.
That should slightly reduce Germany's current account
surplus. A smaller surplus would deflect some of the criticism
that Germany relies too much on exports for growth and has not
done enough to foster domestic demand, which would help
struggling euro zone states.
Businesses and consumers at home will be the economy's
bright spot this year.
Private consumption, which boosted growth in 2013, is
expected to increase by 1.4 percent as German workers benefit
from an increase in employment to a record 42.1 million this
year and a nominal 2.7 percent jump in earnings.
Given such favourable conditions, private households should
spend noticeably more on consumption and home building, the
ministry said. Moderate inflation and low interest rates at
banks should also discourage traditionally frugal Germans from
saving rather than spending.
Separately, GfK market research group said on Wednesday that
the spending of private households would climb by 1.5 percent in
real terms in 2014, compared with an increase of 0.5 to 1.0
percent for the European Union as a whole.
Investment is also expected to rebound after falling in
2013. The Economy Ministry forecasts spending on equipment will
rise by 4.0 percent while spending on building will increase by
Stronger domestic demand should help reduce some of the
economic imbalances within the euro zone, which many blame for
the region's troubles.
"The German economy is back on a stable and broad-based
recovery path," Economy Minister Sigmar Gabriel said. "The
dynamism of Germany's domestic economy is not only good news for
Germany but also for our partners in Europe."
But he also expressed concern that financial bubbles could
form periodically and get banks into trouble. He said that was a
considerable risk for growth and jobs, so stricter regulation of
those markets was necessary.