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Institutes: Merkel launches govt on solid economic footing

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Berlin: German Chancellor Angela Merkel begins her fourth term in office backed by a pick-up in economic growth, a fall in unemployment and an expanding budget surplus, the nation’s leading economic institutions said after raising their latest projections.


“The German economic upturn has gained both in terms of strength and breadth,” the Munich-based Ifo institute, Berlin’s DIW, Halle’s IWH, Kiel’s IfW and the Essen-based RWI said in their latest half-yearly review of Europe’s biggest economy released on Thursday.


The top economists also played down any major fallout for the nation’s economy resulting from what are shaping up to be protracted negotiations to form a new Merkel-led coalition after Sunday’s election.


“The new German government begins with a considerable economic tailwind,” the institutes said, saying they expect the budget surplus to rocket up to 37.3 billion euros ($43.6 billion) next year and 43.7 billion euros in 2019 from 28.3 billion euros this year.


Europe’s biggest economy will expand by 2 per cent in 2018 after growing by 1.9 per cent this year, the institutes said in their latest review of the nation’s economic outlook, unveiled at a Berlin press conference.


The nation’s gross domestic product should slip back a gear in 2019 to grow by 1.8 per cent, the institutes said.


Still, Stefan Kooths from Kiel’s Institute for the World Economy(IfW) also warned that parts of the nation’s industry could risk over heating.


“As the economy has been on an upward trend for some time now, the first signs of tensions are being felt in some segments of the economy,” Kooths told the press conference. The institutes’ latest forecasts compares with their previous predictions released in April of a 1.5 per cent expansion rate in 2017 and 1.8 per cent in 2018.


“Growth was driven by exports, which gained speed in the first half of the year,” said Kooths, referring to the nation’s economic performance so far this year. “However,” he said, “domestic demand remained a driving force behind the expansion.”


Germany’s unemployment rate will drop to 5.7 per cent this year from 6.1 per cent in 2016, the institutes say, which in turn is helping to drive consumer spending.— dpa


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