The Germany economy is firing on all cylinders, according to the country’s influential Ifo think-tank, which has delivered a healthy bump to its GDP growth forecasts for the eurozone’s largest economy over the next year, describing it as “strong and stable”.
The Ifo now expects German economic growth to accelerate at an annual pace of 1.8 per cent this year, from a previous forecast of 1.5 per cent, and hit 2 per cent next year.
Growth will be underpinned by record levels of employment, an expanding construction sector, and still healthy domestic demand, said Ifo.
Timo Wollmershäuser, Ifo’s head of forecasting, said:
We are currently experiencing such a strong first half-year that the momentum will carry us into the coming year.
Germany has been a job creating machine since the sovereign debt crisis hit the continent in 2010, pushing unemployment to the lowest level since reunification in 1990. Ifo said it now expected overall employment to grow from 43.6m to 44.6m in 2018 – a fresh record high.
Still, despite fears that near full employment will drive up inflation beyond tolerable levels, Ifo forecasts that annual consumer prices will rise at a pace of 1.6 per cent next year – still below the eurozone’s target of just under 2 per cent.