FRANKFURT, Dec 15 (Reuters) - Germany’s central bank raised growth projections on Friday, arguing that the economy will continue to enjoy an export-driven boom, even if its rate of expansion is likely to taper off as the business cycle matures.
The Bundesbank now sees calendar-adjusted gross domestic product growth in the euro zone’s biggest economy expanding by 2.5 percent next year, above a June projection for 1.7 percent, while growth in 2019 is seen at 1.7 percent, above a previous forecast for 1.6 percent.
“Germany’s economy is experiencing a strong upswing,” the Bundesbank said in its twice-yearly update of projections. “Driven by lively foreign demand, industry is seeing dynamic growth and the sharp upturn in business investment is persisting.”
“This broad-based, robust economic upswing is reaching an increasingly mature state, which means that the pace of growth is likely to slow in the medium term and converge to that of potential growth,” it added.
But it predicted that export growth will weaken further out, particularly due to capacity constraints and labour shortages.
The Bundesbank also raised its inflation projections for 2018 but cut it for 2019, suggesting that the European Central Bank will continue to struggle to hit its target for price growth just below 2 percent.
The following are the Bundesbank’s new projections for inflation and GDP growth, with June forecasts in brackets. For 2020, the Bundesbank provided projections for the first time.
The Bundesbank updates projections twice a year.
2017 2018 2019 2020 GDP adjusted 2.6 (1.9) 2.5 (1.7) 1.7 (1.6) 1.5 GDP 2.3 (1.6) 2.5 (1.7) 1.7 (1.5) 1.9 Inflation 1.7 (1.5) 1.6 (1.4) 1.7 (1.8) 1.9 (Reporting by Balazs Koranyi; Editing by Matthew Mpoke Bigg)