Germany’s leading economic institutes assume that the economy in Europe’s powerhouse will expand somewhat faster than previously forecast. At the same time, experts warned of a medium-term decline.
In their joint spring forecasts published on Thursday, Germany’s leading economic research institutes forecast that the EU’s largest economy will grow by 2.2 percent this year and 2.0 percent in 2019, compared to 2.0 percent and 1.8 percent, respectively, as forecast last autumn.
“The German economy is still booming, but the air is getting thinner and unused capacities are shrinking,” said Timo Wollmershäuser, head of the economic forecast at the Munich ifo Institute.
Despite the existing budget surplus, he warned the new German government against a massive spending spree in the public sector.
“Especially when government coffers are full, fiscal policy should reflect the impact of its actions on overall economic stability and the sustainability of public finances,” he said.
“The extension of the statutory pension benefits provided for in the coalition agreement contradicts the idea of sustainability.”