BERLIN, June 26 Germany's economy will grow by
2.0 percent this year, Ifo institute said on Thursday, slightly
raising its previous forecast on expectations that companies
will invest more again and drive domestic demand.
But Ifo made its projections dependent on tensions in
Ukraine not escalating and on fighting in Iraq not leading to an
oil price explosion.
The influential think-tank said growth in Europe's largest
economy would accelerate to 2.2 percent next year, up from 0.7
percent expansion last year.
In December, Ifo had forecast growth of 1.9 percent this
year. The government expects Europe's largest economy to expand
by 1.8 percent.
"The pick-up is robust and is strengthening," said Ifo
economist Timo Wollmershaeuser. "The precondition is that the
conflict over Ukraine does not worsen and that there will not be
an oil price explosion because of fighting in Iraq."
Ifo expected equipment investment, which was negative in the
past two years, to pick up by 7.4 percent this year and 10.0
percent next year.
But earlier this week, the institute's closely-watched
business sentiment survey weakened more than expected for June
as companies grew increasingly concerned that tensions in
Ukraine and Iraq would hurt their business.
Ifo said one of the main risks to the global economy was
still the "fragile situation" in the euro zone, where crises
could break out again at any point as countries were still "far
too expensive to be competitive".
Ifo said it did not see dangers of inflation, with consumer
prices rising by 1.1 percent this year and 1.7 percent next year
- in part due to a new national minimum wage. The European
Central Bank defines stable prices as just under 2 percent.
(Reporting by Annika Breidthardt)