German Government Raises 2013 Economic Growth Forecast to 0.5%

German Chancellor Angela Merkel’s government edged up its growth forecast for Europe’s biggest economy this year, citing what it sees as companies’ willingness to step up hiring.

Germany’s gross domestic product will expand 0.5 percent in 2013, Economy Minister Philipp Roesler said today in a posting on Twitter, lifting a prior prediction of 0.4 percent made in January. The ministry left its growth forecast for 2014 unchanged at 1.6 percent.

“There is every reason to be optimistic about the future,” Roesler said in an e-mailed statement. “The labor market is still in full swing. Employment will continue to grow, unemployment will continue to decrease.”

Germany is raising its forecast for growth even as the 17- nation euro area faces a second year of recession. Even so, German business confidence fell for a second month in April, exports dropped more than economists forecast in February and a gauge of industrial output signaled contraction, raising the prospect the economy fell into a recession in the first quarter.

German unemployment is forecast to continue to fall, while countries such as Spain suffer record levels of joblessness. The German unemployment rate will drop to 6.6 percent in 2014 as employment at companies increases from 41.6 million last year to 41.8 million this year and 41.9 million in 2014, Roesler’s ministry said. In Spain, the jobless rate rose to 27.2 percent, the highest in at least 37 years, the National Statistics Institute in Madrid said today.

Job Opportunities

“Growth in Germany is supported this year and next by the domestic economy,” Roesler said. “The robust labor market supports wage and income growth, strengthens purchasing power and provides opportunities for new employment.”

With Merkel seeking a third term in Sept. 22 elections, the buoyant employment market may bolster support for her coalition parties. Merkel’s Christian Democratic bloc had 42 percent support in a Forsa poll yesterday, while the Free Democrats, led by Roesler, met the 5 percent threshold to enter parliament. The combined tally, if replicated at the election, would be enough for a rerun of their current coalition.

The main opposition Social Democrats and their Green party allies had a combined 37 percent in the poll of 2,500 voters in the week ended April 19. The margin of error was as much as 2.5 percentage points.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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