Germany's economy is on a solid upward path but weakening consumption growth and labour market bottlenecks could constrain its expansion in the coming years, the country's central bank said on Friday. The state budget, already in the black, will continue to generate surpluses without new spending measures and state debt could fall to 60 percent of GDP, the government's coveted level, by 2019, the Bundesbank said in its fresh biannual economic projections.
The euro zone's biggest economy has been the engine of the bloc's recovery and the European Central Bank has repeatedly called on Germany to spend more to give the still fragile expansion a boost. But the government, facing elections next fall, has rejected those calls, making fiscal prudence a key plank in its campaign. "The highly favourable setting for household consumption at present looks set to turn slightly gloomy in the years ahead as demographic constraints soften employment growth and higher rates of inflation erode consumers' purchasing power," the Bundesbank said. The economy is likely to face increasing labour supply shortages with the working age population continuing to shrink and even the influx of refugees is likely to have only a minor impact on the labour market in the coming years, the Bundesbank said.
Comments
Comments are closed for this article.