While the recent rise of the euro may hit the competitiveness of German-made goods in the short term, the development will not harm exporters in the long term, the Bundesbank's chief economist Hermann Remsperger said Tuesday.
"The rise in the value of the euro since October 2000 has led to a tangible decline in price competitiveness for Germany," Remsperger acknowledged in a speech prepared for delivery at a capital markets roundtable here.
"But on a long-term average, indicators point to a more neutral competitive position," Remsperger said.
German exporters, grouped under the BGA industry federation, did not seem to agree, complaining Tuesday that the strong euro was hurting their foreign sales, particularly to the United States.
The level of activity towards the United States "very weak", complained BGA President Anton Boerner.
"Considering the fact that the economy is recovering sharply in the US, we had expected developments to be better. Clearly, trade with the US is being hurt by current developments on the foreign exchange markets," Boerner said.
Data published by the federal statistics office Destatis in Wiesbaden showed that the exports to the United States fell by 10.1 percent in the period from January to November and by 14.1 percent in November alone.
But the Bundesbank's chief economist Remsperger insisted that the situation was not as bad as it seemed.
"The cost advantages of German companies within the eurozone are forming some sort of counterweight to the development of the dollar exchange rate," he said. And overall economic prospects for Germany, the biggest eurozone economy, were favourable, Remsperger continued.
Manufacturing orders had picked up substantially in the period from October to December, with export demand continuing to develop positively.
"Consistent with this scenario is that the business climate has also continued to improve."
The global economy was expected to grow by more than four percent this year, the strongest growth since the boom year of 2000, according to International Monetary Fund (IMF) forecasts.
"Despite the strong movements in exchange rates of recent months, the chances are good that the German economy will continue to profit clearly from the favourable global development," Remsperger said.
Since many public holidays in Germany are set to fall on the weekend this year, there will be an additional five working days in 2004 and that could normally lead to a pick-up in gross domestic product (GDP) growth to 1.5-2.0 percent, as the German government was predicting, the German central bank's chief economist said.
But he added that "the bottom end of the range looks more likely at the moment."
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