• Aug. 19, 2017, 5:39 pm

IMF says German economy could grow more than 1.6 percent this year

BERLIN (Reuters) – Germany’s economy could grow more in 2015 than the 1.6 percent the International Monetary Fund forecast in April if lower energy prices and the European Central Bank’s bond-buying scheme feed through more than expected, the IMF said on Monday.

Enrica Detragiache, assistant director of the IMF’s European department, told a news conference in Berlin that the IMF would, however, stick to its German growth forecast for the time being.

Last month Berlin raised its forecasts for 2015 and 2016 to 1.8 percent due to new jobs, cheap oil and the weak euro.

The IMF said there were still risks such as weaker than forecast growth in Germany’s trade partners or an escalation in the euro zone’s troubles.

Private consumption will be the main growth driver in 2015 as workers benefit from robust wage increases while net exports will also provide support, the IMF said.

The IMF said cheaper energy and a weaker euro would probably increase the size of Germany’s large current account surplus, which last year hit a post-war high of 7.5 percent of gross domestic product (GDP).

“We project the surplus to exceed 8 percent of this year and decline slowly in the medium term, as the energy price windfall is gradually spent and macroeconomic rebalancing in Germany and within the euro area strengthens,” the IMF said.

It said the consistently large surplus was a cause for concern because demand remains weak in advanced economies despite central banks implementing ultra-loose monetary policy.

The IMF, which has repeatedly called on Berlin to increase investment, said Berlin’s plans to spend more on public transport, digital infrastructure and energy efficiency did not go far enough.

“They do not fully address existing needs and a stronger effort would be warranted,” it said, adding that current fiscal rules would allow more spending.

The IMF said that to boost willingness to invest, Germany needed to tackled the regulatory uncertainty and steep electricity costs for some firms caused by the country’s transition toward renewable energy.

It suggested using alternative financing such as public-private partnerships to raise investment in municipalities.

(Reporting by Reinhard Becker; Writing by Michelle Martin; Editing by Erik Kirschbaum/Jeremy Gaunt)

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