Germany raised its 2011 growth forecast by half a percentage point to 2.3 percent on Wednesday, predicting the recovery in Europe's powerhouse will broaden and that previously sluggish domestic demand will pick up. The Economy Ministry's forecast was slightly below a Reuters poll forecast on Wednesday for a 2.5 percent expansion in 2011, though some economists expect growth to be almost as strong as last year's 3.6 percent.
Germany's rebound from its sharpest post-war recession has been surprisingly strong, marking its fastest growth last year since reunification and leaving eurozone peers trailing. Recent bullish data has bolstered expectations Germany's strong run will continue, while eurozone nations like Ireland, Greece and Portugal are being held back as they struggle with a sovereign debt crisis.
The ZEW think tank's gauge of German investor sentiment this month surged past expectations, reflecting confidence the industrial sector will create jobs and spur investment. As economic recovery has boosted the labour market, the government predicts the unemployment rate will fall to 7.0 percent this year from an average of 7.7 percent last year. That would help spur private consumption, Bruederle said, which is much needed to offset an expected slowdown in exports.
The ministry lowered its forecasts for exports and imports and said global trade, including protectionism, posed the main risks to the outlook. The government sees exports rising by 6.5 percent this year, down from a previous forecast of 8.0 percent, while imports were seen up 6.4 percent after a previous estimate of 7.7 percent.