German ‘five wise men’ trim 2016 growth forecast

Frankfurt / AFP

Global uncertainties will shave around 0.1 percentage point off growth in Germany this year, but Europe’s economic powerhouse remains in a moderate uptrend, an expert panel said on Wednesday.
The German Council of Economic Experts, known as the five “wise men”, said it is forecasting gross domestic product (GDP) growth of 1.5 percent this year — fractionally lower than their previous prognosis from last November—and 1.6 percent growth in 2017.
“In view of the slightly weaker external economic environment, our previous forecast for 2016 has been revised downward slightly,” the economists said.
Nevertheless, “the moderate uptrend is continuing, driven by domestic consumer spending,” insisted the panel, which is actually made up of four men and one woman.
The labour market remained robust, fiscal policy was expansive and monetary policy was “extremely accommodative,” the experts said.
“The turbulence seen in the international financial markets at the beginning of the year does not point to a global economic contraction,” the panel continued.
The sharp drop in financial markets in January was largely due to a decline in banking stocks reflected investor concern about banks’ profitability, the experts said.
The massive influx of refugees remains a “huge challenge” for German economic policy, the panel said.
Bottlenecks in the asylum application process were currently leading to delays in integrating the newcomers into the labour market and that meant the huge numbers of new arrivals were not pushing up the headline jobless rate for the time being.