Bundesbank raises forecast for German growth to 3.1pc
Published 11/06/2011 | 05:00
THE Bundesbank raised its forecasts for German growth yesterday, saying Europe's largest economy has entered a broad and prolonged upswing.
Gross domestic product would expand 3.1pc this year and 1.8pc in 2012, the Frankfurt-based central bank said in its bi-annual economic outlook.
That compares with a February prediction by then Bundesbank president Axel Weber of 2.5pc growth for this year and a December forecast of 1.5pc for 2012.
Surveys indicated economic expansion "could even exceed the forecasts in this baseline scenario", the central bank said.
Germany's economy grew 3.6pc last year, the fastest since reunification two decades ago, as booming exports fuelled domestic hiring and spending.
Germany's economic performance may put further pressure on the ECB to keep raising interest rates, even as the sovereign debt crisis afflicting peripheral countries worsens.
"The prospects of the German economy experiencing a lengthy period of expansion are rising" as the recovery "has evolved into a broad-based upturn", the Bundesbank said.
While exports remained the "pillar" of German growth, "in clear contrast with the upturn of the last decade, the domestic economy has a much larger role to play this time", it said.
The euro rose against the dollar after the release of the Bundesbank's report, paring losses to show a 0.1pc decline on the day. The currency traded at $1.4489 in Frankfurt.
Unemployment would continue to decline, taking the jobless rate to 6.5pc in 2012 from 7pc this year, the Bundesbank said. Inflation will average 2.5pc this year before slowing to 1.8pc in 2012. (Bloomberg)