HWWA institute raises German growth outlook

BERLIN - German economic expansion will be stronger than previously expected this year, the HWWA economic research institute forecast on Monday, raising its 2006 growth forecast by half a percentage point to 2.1 percent.

By (Reuters)

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Published: Mon 18 Sep 2006, 5:24 PM

Last updated: Sat 4 Apr 2015, 4:22 PM

The Hamburg-based think tank said it expected gross domestic product (GDP) growth to slow to 1.1 percent next year, a tenth of a point better than it had forecast in mid-July.

‘We still assume that there will be a clear economic slowdown next year due to the drastic increase in value added tax (VAT) and other restrictive measures in Germany,’ it said.

The government is planning to raise VAT by three percentage points to 19 percent from Jan. 1 2007 to help shore up Germany’s strained public finances and cut non-wage labour costs.

In July, the institute saw 2006 growth at 1.6 percent.

The HWWA forecast private consumption would contract next year by 0.3 percent after rising by 0.8 percent this year.

The institute also saw export growth slowing in 2007 to 5.4 percent from 9.6 percent this year.

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