German economy probably growing by 2.5 percent

In its spring forecast the Institute for the German Economy (IWF) predicts German GDP to grow by 2.5% in real terms in the year 2007. For the next year the forecast figure is 2.2%. This forecast figure is congruent with output estimates made by more than 2000 East and West German companies which took part in the above-mentioned IWF survey.

According to this survey, 57% of companies in the West and 50% of those in the East say that their output is going to be higher in 2007 than in the previous year. Just 8% of companies expect output to be falling.

One of the reasons for this economic upswing is investment demand. Investment in plant and equipment will increase by 4.5% this year and by 4.0% in 2008, according to the IW forecast. More than fifty percent of companies questioned in the West and one third of those questioned in the East of Germany plan to invest more than in 2006. Just one in eight companies want to reduce investment. 70% of those companies which expect the economy to grow believe that brisk investment plays a key role in economic growth also in 2008.

The IW forecast is available in PDF format for download from the internet. GERMAN