BERLIN (MNI) – The German government has raised its GDP forecasts
for this year and next to +3.4% and +1.8%, respectively, from the +1.4%
and +1.6% projected in April, the Economics Ministry said Thursday.

“The upswing is self-sustaining, it needs no crutches anymore,”
Economics Minister Rainer Bruederle said at a press conference to
present the projections. Over the next five years, the government
expects annual GDP growth 2%, he said.

After strong impulses from the export sector, domestic demand has
now picked up steam, the minister said: “The upswing has seized all
sectors of the economy and is gaining in breadth.”

Private consumption will pick up markedly now, Bruederle reckoned.
Due to tax cuts and higher wages, the disposable income of private
households will rise by 2.7% this year and by 2.3% next year, he
predicted. “There will be pleasing wage rounds for employees.”

Bruederle also pointed to economic risks from protectionism and
currency manipulation. “There must not be … a currency or trade war;
this would hurt everybody,” he warned. “We must act decisively against
interventions, currency manipulation and protectionism.”

Still, the minister reckoned that the current strong euro exchange
rate would not become a problem for Germany’s upswing. “Our array of
products is not so sensitive to foreign exchange rates,” he argued,
noting that a large share of German exports are investment goods.

“The strong euro shows that we have a pleasingly broad [economic]
recovery” in the Eurozone, Bruederle added.

Due to the strong domestic upswing, unemployment in Germany will
fall below three million this autumn, Bruederle predicted, noting that
businesses are already having problems finding enough skilled labor.

“The German economy is facing an enormous lack of skilled labor,”
the minister said. “This will lead to significant economic losses if we
do not counter this directly,” he warned.

The revised growth forecasts will form the basis of the projections
of the government’s tax estimate council, which is scheduled to issue
new tax revenue projections on November 4.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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