Germany on Wednesday trimmed back its economic forecast for this year but insisted Europe's top economy remained "in good shape", with the refugee influx likely to boost short-term domestic demand. In its annual economic report, the government said it expected gross domestic product (GDP) to expand by 1.7 percent in 2016, fractionally below an earlier forecast of 1.8 percent. "The German economy is fundamentally in good shape," the report said. Economy Minister Sigmar Gabriel, presenting the report, said the country's economic situation was "positive and will remain so".
And in order to make sure it does, "we will have to invest more," said Gabriel, who is deputy chancellor. He said that given low oil prices, the weak euro and interest rates that are close to zero, growth of 1.7 percent was "not exceptional, but averagely good."
The government's forecast is in line with that of the International Monetary Fund, but slightly lower than the 1.9 percent predicted by the German industry federation BDI. The main economic impulses "are currently coming from private household and state spending, as well as housing construction," the government report said. "The large influx of refugees is contributing to this," it added. Nearly 1.1 million asylum seekers arrived in Germany in 2015. The government noted that the German economy has also felt the pinch from the slowdown in developing economies such as China. "The upward trend tailed off in the second half of 2015," the report said.
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