Economy expected to grow by just 1.7 percent

According to the spring forecast by the Institute for the German Economy (IW) in Cologne, the economic upswing in Germany is losing momentum. GDP in real terms is expected to grow by 1.7% this year and by only 1.4% next year. The IW study, however, also shows that the German economy is not losing all its momentum. Among the more than 2000 German companies interviewed, 45% expect output to increase in the year 2008 and just 12% think that it will fall.

The main reason for the economy to lose momentum is seen to be less favourable global conditions ranging from high energy and raw material prices to the crisis on the real estate and financial markets. Against this backdrop, 36% of the companies interviewed count on more exports and just 10% forecast exports to fall. However, with an increase by 4.2% and 3.5% in exports this year and next year respectively, the German foreign trade will hardly be a driving force behind economic growth in Germany. Nevertheless, 37% of businesses are willing to invest more this year than last year. Only 18% think that they will have to reduce their investments. GERMAN