Germany on solid growth path

The German central bank, Bundesbank, on Friday issued new growth projections for Europe's biggest economy, expecting output to expand by 1.4 percent in 2014, 1.0 percent in 2015 and 1.6 percent in 2016.

The Bundesbank's second bi-annual growth report marks a downward revision of figures, which were previously estimated at 1.9 percent, 2.0 percent and 1.8 percent for the three years, respectively.

The report noted that following a brisk start to the year 2014, with 0.8 percent output growth in the first quarter "due to the mild winter," the German economy lost momentum to a "surprising extent." Between April and July, Germany's gross domestic product (GDP) actually shrunk by 0.2 percent, while virtually stagnating in the third quarter at a plus of 0.1 percent.

"However, there is reason to hope that the current sluggish phase will prove to be short-lived," Bundesbank President Jens Weidmann said in a statement.

Weidmann justified his confident assessment by stating that the German economy was still in "remarkably good shape."

"This is not only benefitting the domestic economy, but is also enabling German exporters to seize opportunities on foreign markets," he added.

Wages to boost spending, inflation

In the course of 2015, these opportunities were expected to increase provided that the eurozone recovery strengthened and world trade gathered momentum, the bank said.

Moreover, wage hikes and the introduction of a minimum wage in Germany would bolster household spending, which has become a main pillar of GDP expansion here. This in turn would lead to rising prices and the German inflation rate, which the Bundesbank forecast to come in at 0.9 percent this year, 1.1 percent in 2015 and 1.8 percent in 2016.

Economic development for Germany could even be better over the next three years as a continuation of low oil prices would have the effect of a "small stimulus package," reducing costs for both households and businesses.

"Economic growth in 2015 and 2016 could turn out to be between 0.1 percent and 0.2 percentage points higher in each case," the bank asserted, with inflation probably lower by half a percentage point.

uhe/pad (dpa, AFP)