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German leading economic institutes cut growth forecast

Xinhua, October 8, 2015 Adjust font size:

Four leading economic institutes in Germany cut their forecast for German growth in 2015 to 1.8 percent on Thursday, citing a moderate expansion of the world economy.

"The German economy is experiencing a moderate upturn," said the think-tanks in their latest joint forecast which forecast Germany's gross domestic product (GDP) to grow by 1.8 percent in both 2015 and 2016. In their spring forecast, the economists expected Europe's biggest economy to expand by 2.1 percent this year.

According to the institutes, which include DIW in Berlin, IWH in Halle, Ifo in Munich and RWI in Essen, economic growth would mainly be driven by private consumption as real incomes of German people increase thanks to rising wages, low inflation and falling energy prices.

Investment would also accelerate due to favorable financing conditions. Exports, however, were only expected to rise slightly as the global economy remains moderate despite a recovery in the euro zone and the stimulating effects of a weak euro started to fade.

"The weak world economy is a constraining factor," said Timo Wollmershaeuser, interim director of the Ifo institute.

Economists expect the influx of refugees to affect German economy. In 2016, the jobless rate in Germany is expected to increase to 6.5 percent from 6.4 percent as refugees increasingly become available in the labor market.

The German government's budget surplus is expected to slump to 13 billion euros (about 14.7 billion U.S. dollars) in 2016 from 23 billion euros in 2015 due to increasing expenditures for settling refugees.

Despite increasing costs, refugees, if successfully integrated, would also benefit Germany which faces an aging society, according to economists.

"The immigration of refugees is placing a significant short-term burden on the German economy. But it could also create opportunities if the right economic policy measures are implemented to successfully integrate immigrants," Wollmershaeuser said.

The institutes said Germany should develop an immigration policy which could integrate refugees into its labor market in order to capitalize on opportunities. Endit