Germany cuts 2016 growth forecast to 1.7 percent

The German government cut its forecast for 2016 growth to 1.7 percent on Wednesday, expecting domestic demand to continue serving as the main driving force for economic growth.

The latest figure was slightly lower than the 1.8 percent the German Economy Ministry expected in October last year. In 2015, Europe's biggest economy expanded by 1.7 percent, driven mainly by private consumption.

"The economic strength of Germany is evidence of successful economic and employment policies but is not a guarantee of future prosperity," said German Economy Minister Sigmar Gabriel, stressing the need to boost both private and public investment.

The ministry expected private consumption to increase by 1.9 percent this year, as same as in 2015. Investment in equipment, however, was only projected to rise by 2.2 percent, compared with the 3.6 percent in last year.

Net exports, Germany's traditional economic engine, was expected to make a negative contribution to the growth, knocking 0.4 percentage points off the increase of gross domestic product (GDP).

"We must set the course for the future now, so that Germany will also be a leading economic and industrial location in ten years," Gabriel said, adding that the government would strengthen public investment, support the digitalization in the industry and take measures to stimulate private investment.

Stable labour market, increasing wages, low inflation and falling energy prices fueled private consumption in Germany.

The country's consumers' confidence remained at a high level despite risks including terror attacks and the refugee crisis.

Berlin-based German Institute for Economic Research (DIW) said earlier on Wednesday that driven by robust consumption, the German economy would expand by 0.4 percent in the first quarter of 2016, following an expansion of 0.3 percent in the last quarter of 2015. Endit