Researchers expect weaker economic growth

researchers expect weaker economic growth

Economists expect significantly weaker economic growth in germany this year than previously assumed. The munich-based ifo institute and the essen-based RWI lowered their forecasts.

"In the first few months of the year, the economy has developed much worse than expected," said ifo’s head of economic research, timo wollmershauser, in berlin on tuesday.

For 2018, its institute still expects gross domestic product (GDP) to grow by 1.8 percent. In the spring, economists had predicted 2.6 percent. For the coming year, they lowered their forecast from 2.1 to 1.8 percent. By way of comparison, the german economy grew by 2.2 percent last year.

"Powerful storm clouds are currently brewing in the german economic sky," said wollmershauser. A risk to economic development is the trade policy of the USA. Since june, the USA has been levying tariffs on aluminum and steel imports from the EU as well. The EU and china have announced countermeasures.

An expansion of trade barriers has become an unassailable risk, the ifo institute warns. The iran conflict could also lead to higher oil prices. If the U.S. Government’s pressure on the EU became so great that the EU also abandoned the nuclear agreement, the price of oil would be allowed to rise further.

An end to the economic upswing is not in sight, however. "We believe that the german recovery will continue, even if not at the same pace as in 2017," wollmershauser said. Researchers also believe that the number of unemployed will continue to fall.

According to the institute, the economy continues to benefit from the fact that people are buying a lot and a lot is being built. The federal government’s financial policy is also supporting the economy – in the coming year, for example, with the increase in the mother’s pension and the lower contribution rate for unemployment insurance.

In addition to the ifo institute and the german institute for economic research (DIW), the essen-based economic research institute RWI also sharply lowered its forecasts. For 2018, the economic growth was reduced from 2.4 to 1.8 percent and for 2019 from 1.9 to 1.5 percent. The RWI also justified its decision with the auben trade. "The economic climate has become harsher," said RWI head of economics roland dohrn.

"Even if only small parts of german exports are affected by the tariffs imposed by the u.S., the sprouting of protectionism was allowed to have a negative effect on the export climate and make companies act more cautiously," explained dohrn. The planned brexit also means an unclear future for economic relations between the UK and the EU. However, the upswing in the domestic economy is intact.

The federal government had also downgraded its forecast. But she is a bit more optimistic and expects growth of 2.3 percent for 2018. 2.1 percent in 2019.

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