Germany's economic growth outlook for next year is healthy despite a looming rise in sales tax, Finance Minister Peer Steinbrueck told Spiegel magazine in an interview released on Saturday.
He repeated the government's forecast that Europe's biggest economy would grow by 2.5 percent this year. "The pickup is robust. This year we have growth of 2.5 percent. If it is a little less next year because of the sales tax rise, it is not a collapse - the outlook for next year is great," Steinbrueck told Spiegel.
Steinbrueck said the government's plan to raise the value-added tax rate by three percentage points to 19 percent from January 1 would not derail the economy as it was a long-planned move.
"It (the rise) will not be a shock, we have said from the outset that it is coming because it is necessary. In addition, the economy is for the first time firing on all cylinders," he told the magazine. The increase in VAT is aimed at easing pressure on Germany's strained public finances and reducing non-wage labour costs.
Germany has breached the European Union's deficit limit of 3 percent of gross domestic product every year since 2001 but has seen tax revenue surge this year as economic growth has gathered pace. Steinbrueck said exports were going well, companies were investing, consumption was gradually picking up and even the construction industry had turned around after a dismal decade.
Steinbrueck also told Spiegel he was not ruling out the possibility that new borrowing in Germany would fall below his latest estimate of 30 billion euros ($38.9 billion) this year. On Friday he told parliament net new borrowing in 2008 should be clearly below 20 billion euros.