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IMF raises German growth forecast, urges more public investment
July 21, 2014 / 2:01 PM / 3 years ago

IMF raises German growth forecast, urges more public investment

Cranes of German shipyard Blohm&Voss are silhouetted against the setting sun in Hamburg July 22, 2013. Picture taken July 22. REUTERS/Fabian Bimmer

BERLIN (Reuters) - The International Monetary Fund (IMF) raised its forecasts for German economic growth on Monday and reiterated a call for Europe’s largest economy to increase public investment to boost growth and support the euro zone bloc.

In a statement detailing policy recommendations, the IMF said it expected the 2.7 trillion euro ($3.65 trillion) economy to grow by 1.9 percent this year, more than the 1.7 percent it had previously forecast.

It expects 1.7 percent growth next year compared with a previous forecast of 1.6 percent.

While applauding Germany for its prudent economic policies and commitment to European integration, the Fund also said the country should make more public investments.

Germany could invest up to 0.5 percent of gross domestic product a year more over the next four years without violating fiscal rules, the Fund said.

“Most directors recommended that the authorities use available space to boost public investment in projects with true economic value, especially in transport infrastructure and education,” the Fund said in the statement.

Given that interest rates would likely stay low for a prolonged period, the Fund said Germany needed to be “vigilant to developments in the housing market and insurance sector”, adding it was reassured by plans to address issues in the latter. ($1 = 0.7398 Euros)

Reporting by Annika Breidthardt, editing by John Stonestreet

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