German gov't raises 2015 growth forecast to 1.8 pct

The German federal government raised its forecast for economic growth in 2015 on Wednesday, citing a strong private consumption.

The German economy would expand by 1.8 percent this year, said German Federal Economy Ministry. In January, the government expected the gross domestic product (GDP) to increase by 1.5 percent. In 2014, Europe's biggest economy grew by 1.6 percent.

For the next year, the government also saw a GDP growth of 1.8 percent.

"The German economy is in an upswing," said German Economy Minister Sigmar Gabriel in a statement, "Supported by a continued strong performance of the labour market with rising wages and increasing employment, Germany is on a solid growth path."

Private consumption was seen by the government as the main pillar supporting the economic upswing. In 2015, it was expected to increase by 2 percent, after a growth of 1.2 percent in last year.

The number of employed people was expected to increase to a historically high of 43 million, and wages to increase by 2.8 percent.

Foreign trade, Germany's traditional main driving force, and investment, however, would not make a strong contribution to the economy, according to the government's forecast.

Although exports would grow by 4.7 percent thanks to a slight acceleration of global growth and an improvement in the euro zone, imports would also increase by 5.7 percent due to strong domestic demands.

The total investment, meanwhile, was expected to rise by only 2.2 percent in 2015, lower than the growth of 3.4 percent in 2014.

"The current dynamics of the domestic economy is encouraging. However, there is no room for complacency," Gabriel said, "We have to work especially hard to improve our medium-term growth prospects. Investment in education and research, infrastructure and better conditions for private investment are important starting points." Endit