Vibrant domestic demand and strong exports in the euro zone will boost growth in Germany this year and next, the Ifo economic institute said on Tuesday, raising its 2017 growth forecast for Europe's largest economy. As Ivor Bennett reports, the numbers bode well for Chancellor Angela Merkel as she seeks a fourth term in office in elections later this year.
Its Christmas markets may be more familiar than its summer sales but in Germany, it seems shopping isn't just confined to winter. Such is the strength of domestic demand, the influential IFO institute has raised its growth forecast for 2017 from 1.5 percent to 1.8 percent. An uptick in construction also cutting through. While the wider euro zone recovery is helping to boost exports. SOUNDBITE (English) JEREMY STRETCH, HEAD OF FX STRATEGY, CIBC, SAYING: "We're also seeing financing costs remaining low because of weak or subdued monetary policy backdrop in the euro zone so that's providing a stimulus on the monetary side. And I think you overlay that with the improving global backdrop and is providing a positive trade trajectory for Europe and particularly Germany as a whole." But in an speech to German industry bodies, it was clear Angela Merkel still has concerns. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "Open markets and free, fair, sustainable and inclusive trade is a key focus of our G20 presidency. Ultimately it is for the benefit of everybody." She said she'd push for a broad agreement on open markets at next month's summit but cautioned this won't be easy with US President Donald Trump. While her rival for the upcoming German election warned of the consequences of Brexit. (SOUNDBITE) (German) GERMAN SOCIAL DEMOCRAT LEADER AND CANDIDATE FOR CHANCELLOR, MARTIN SCHULZ, SAYING: "I believe, and this is painful for me, that on both sides of the Channel people haven't realised how dramatic this process is." Neither of those risks were of real concern to IFO economists. But with just three months before Germany goes to the polls, politicians aren't taking any chances.