Germany's Ifo Institute ups growth forecasts

Germany’s Ifo Institute has upgraded its growth forecast for this year to 1.8% from a 1.6% estimate in April.

Timo Wollmershäuser, interim director of the Ifo Center for Business Cycle Analysis and Surveys, said: “The first quarter of 2016 was better than expected. The moderate upturn in the German economy that started in 2014 is entering the second half. It may even run into extra time."

The Ifo expects Germany’s unemployment rate to drop to 6.1% this year from 6.4% in 2015 and to stabilise at 6.1% next year.

Unemployment is seen declining to 2.7m in 2016 from 2.8m and expected to remain at this level in 2017.

“The halt in the decline reflects the impact of refugees who are gradually entering the labour market," Wollmershäuser said.

As far as inflation is concerned, the Ifo Institute expects an increase to 0.5% this year and 1.5% in 2017 from 0.3% last year, approaching the European Central Bank’s target of just under 2%.

The Institute reckons exports will only grow by around 2.9% this year, but will rise 4.1% in 2017. At the same time, Germany’s high current account surplus (trade, services and transfers), which it pointed out has attracted criticism from the European Commission, will continue to rise from €257bn euros in 2015 to €274.5bn this year and €286.5bn the next.