The German growth forecast for 2010 was revised up
to 3% by the Deutsche Bundesbank on Thursday,
following last week's report of impressive GDP
(gross domestic product) growth of an annualised rate of almost 9%, in the second quarter.
In its monthly report for August, the Bundesbank
raised its forecast from a previous prediction of
1.9%. The central bank said that it expects the
German economy to slow in the remainder 2010 but
added that the expansion in 2010 may well be the
strongest since 2006. In 2009, Germany's economy contracted by 4.7%,
the worst recession since World War II.
"More than half the decline in production
triggered by the crisis has been made good,"
Bundesbank said. "Favourable conditions abroad and
domestic factors both helped."
Exports accounted for 41% of German GDP in 2009, compared with 13% in Japan
and 11% in the US.
Foreign sales are forecast to grow 8% in 2011 after expanding
11% this year, the DIHK camber of commerce and industry,
which represents 3.6m companies, said last week. The trade surplus is expected
to widen, to €160bn from €159bn in 2010.
“The economic recovery in the US is proceeding somewhat
more slowly than forecast some months ago,” DIHK said.
“In the other industrialised countries,
especially in Europe, the recovery is also restrained.”
While German growth in the second quarter,
increased demand from other Eurozone countries, there is still pressure for
action to increase domestic demand.
Last week, Jean-Claude Juncker,
Luxembourg’s prime minister and chairman of the Eurogroup of finance ministers,
attacked German economic policy, according to the
Luxemburger Wort. Germany’s success was based on “wage and social
dumping,” Juncker is reported as having said. “The way Germany went about
improving its competitiveness, I would not like to see in our country.”
Since the launch of the euro in 1999, German workers had seen a meagre 12% rise
in wages, whereas his countrymen saw a 41% rise, he said.
It's a bit like the kettle calling the pot black
Luxembourg has favourable terms for financial
services firms and its VAT rate of 15% has resulted in international operations
such as Skype locating there.
Germany is facing the issue of an ageing
population and its pension numbers rose to 17.5m in 2009, while duration of payments time
doubled from 1960. This reduces the chance the government will impose
income-tax cuts to encourage spending.
"We were successful in building one of the most competitive economies in the
world, why should we ruin that by pumping up wages now?"
said Thomas Mayer, chief economist at Deutsche Bank. "That would increase
unemployment. And we shouldn't punish our exporters, that's idiotic, they're our