German economy to grow by 2 percent despite crisis in the US

Even though the real estate crisis and the upward revaluation of the Euro are currently causing quite a stir, the economic upswing in Germany is hardly affected by this, forecasts the Institute for the German Economy (IW) in Cologne. According to the IW´s latest estimates GDP will probably grow by 2.5% in real terms this year and by 1.9% in 2008.

Domestic demand alone is expected to increase GDP by 2.1% in 2008 while foreign trade may even decrease GDP´s increase by 0.2%: even though German exports are expected to increase by 6.4% in 2008, imports are estimated to grow even faster by probably 7.8%.

The positive domestic economic development is the driving force behind the upswing of the German economy. One important factor in this respect is investment in equipment and machinery which has grown so far by 10% in 2007 and which is expected to increase by 6.5% in 2008. Private consumption, however, is forecast to stagnate in 2007 and grow slightly by 1.8% in 2008 according to the IW. The slight growth expected for next year is seen to be a consequence of the recovery on the labour market: the number of gainfully employed people is forecast to rise by almost 600.000 this year and another 300.000 next year. GERMAN