BERLIN (Reuters) - Germany’s DIHK Chambers of Industry and Commerce raised its growth forecast for Europe’s biggest economy to 2.0 percent for this year from its previous estimate of 1.8 percent and sees an even stronger expansion next year.
The German economy is enjoying a consumer-led upswing, helped by record-high employment, moderate inflation and ultra-low borrowing costs. The upturn is boosting tax revenues and the state’s budget surplus, which should help Chancellor Angela Merkel seal a tricky coalition agreement in coming months.
“The economy is firing on all cylinders,” DIHK managing director Martin Wansleben said, adding that the upswing was broadly based on strong domestic demand and solid exports.
The DIHK said it expected growth of 2.2 percent in 2018.
“Investments are kicking in as an additional growth driver,” Wansleben said.
He urged the next government to lower corporate taxes, increase public investments in infrastructure and pass an immigration law to attract more skilled workers from abroad despite a popular backlash following the refugee crisis.
According to the DIHK’s autumn survey, business morale regarding current conditions reached a record-high as 51 percent of firms reported good conditions, 43 percent said things were satisfactory and only 6 percent said things were bad.
The DIHK’s survey of 27,000 managers, the biggest of its kind in Germany, found that 25 percent expected conditions to improve further, 64 percent for them to remain stable and only 11 percent expected a deterioration.
Asked about the biggest threats for future growth, most companies pointed to shortages of skilled labor and rising labor costs as the principle risks.
Wansleben said a failure by the European Union and Britain to clinch a Brexit trade agreement in time would not stifle Germany’s economic upswing, but it would put a question mark over DIHK’s growth forecast for 2018.
“Our projections are based on the assumption that the people in charge are dealing with the matter in a way so that there won’t be a crash,” Wansleben said.
Asked whether a breakdown of talks between Brussels and London had the potential to derail Germany’s economic upswing, he said: “The upswing wouldn’t be halted, but this would be a very bad signal, politically.”
Additional reporting by Gernot Heller; Editing by Madeline Chambers and Gareth Jones