German economists raise 2010, 2011 growth outlook

BERLIN: The German economy will grow by 3.5 percent this year and by 2 percent in 2011, when unemployment is expected to fall to a 19-year low, leading think-tanks said on Thursday.

The new projection for this year is more than double the forecast of 1.5 percent that the five institutes gave in April. The 2011 projection for Europe's biggest economy is somewhat better than the 1.4 percent they predicted then.

As the economy recovers, the number of people out of work should average less than 3 million for the first time since 1992, the forecast said, with the jobless rate at 7 percent.

It also predicted that Germany will get its budget deficit back back below the maximum 3 percent of gross domestic product stipulated by eurozone rules next year already, putting the shortfall at 3.8 percent in 2010 and 2.7 percent in 2011.

The government so far has predicted a deficit of 4.5 percent this year.

Strong export growth helped Germany to quarter-on-quarter economic growth of 2.2 percent in the second quarter. That triggered a slew of forecast revisions from economists.

While the pace is expected to slow amid a cooling global rebound, growth is expected to remain healthy, and rising consumer confidence has fed hopes of stronger domestic demand.

The government is due to update its own growth forecast next week. Its existing projection, also from April, is for growth of 1.4 percent this year and 1.6 percent in 2011.

The economy shrank by 4.7 percent last year, easily its worst performance since World War II.

Economy Minister Rainer Bruederle said Germany will have next year to ``continue with the absolutely necessary budget consolidation (and) withdraw from interventions in market economic processes.''

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