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German economic advisers forecast growth of 1.7 pct in 2015

Xinhua, November 11, 2015 Adjust font size:

A panel of German government economic advisers said on Wednesday that the German economy would expand by 1.7 percent this year, adding that the costs of handling the refugee crisis was "manageable" for the German government.

The forecast of the "Five Wisemen" panel was in line with that of the German government which saw private consumption as the main driving force for economic growth.

"Positive overall macroeconomic developments will continue in the foreseeable future," the five economists said in their annual report. However, they only expected German gross domestic product (GDP) to increase by 1.6 percent in 2016, less than the forecast of 1.8 percent by the German government.

The advisers said the refugee influx would lead to additional public spending of up to 8.3 billion euros (about 8.9 billion U.S. dollars) in 2015 and up to 14.3 billion euros in 2016, but these costs should be manageable given Germany's strong public finances.

They also estimated that refugees would increase the labour force in Germany by up to 500,000 people by 2020 and raise demand for private housing. However, measures such as a flexible work arrangement and minimum wage exemption should be taken to help them integrate into the job market.

On Wednesday, the German economy ministry also said demand from refugees would help drive the German economy in the second half of 2015. Other impetus for a "solid expansion" include low oil prices and a weak euro.

For the euro zone, the German government's advisers forecast a growth of 1.6 percent this year and 1.5 percent next year. They said the European Central Bank should start to tighten its monetary policy, warning that long-lasting low interest rates would hurt financial stability in the common currency area.

"Further structural reforms to strengthen markets and competitiveness are crucial for a self-sustaining economic recovery. In addition, monetary policy is leading to a build-up of risks to financial stability which could pave the way for a new financial crisis," they said in the report. (1 euro = 1.07 U.S. dollars) Endit