German Economy May Grow 2.4% as Unemployment Drops, Experts Say

The German economy, Europe’s biggest, may grow as much as 2.4 percent next year as unemployment declines, two of the country’s leading economic research bodies said.

German growth will accelerate in 2014 from 1.3 percent in 2013, the Halle-based IWH institute and Kiel Economics said in a joint forecast. Earlier today in a separate report, the Kiel-based IfW institute said the expansion will speed to 1.5 percent in 2014 from 0.6 percent this year.

“At the moment we have a very robust labor market,” German Labor Minister Ursula von der Leyen said in a Bloomberg Television interview from Berlin. “We have the highest employment rate since ever, actually we have 1 million vacant jobs.”

With unemployment near a two-decade low and a shortage of skilled labor, German workers won wage deals of as much as 6.5 percent last year, helping the economy recover from its fourth-quarter slump. Retail sales rose the most in more than six years in January as consumer sentiment improved.

Germany’s unemployment rate will decline from 6.4 percent this year to 5.7 percent in 2014, the IWH and Kiel Economics said. The IfW institute said the rate will drop from 6.7 percent to 6.6 percent.

Accelerating growth and declining unemployment will help Germany reduce its budget shortfall, with Finance Minister Wolfgang Schaeuble forecasting a balanced federal budget, adjusted for one-time effects and swings in the economy.

Budget Surplus

Germany’s overall budget deficit, which includes state and municipal finances as well as social-insurance coffers, will turn into a surplus next year, with IWH and Kiel economics predicting a surplus of 0.5 percent of gross domestic product and the IfW institute forecasting a surplus of 0.3 percent.

The government has selected four economic institute groups to provide twice-yearly, joint assessments of the economic outlook. The eight organizations, grouped into four cooperating units, are Munich’s Ifo institute with the KOF institute in Zurich; the IfW institute in Kiel with the ZEW Center for European Economic Research; the IW Halle institute with Kiel Economics and Research Forecasting; and the RWI Essen institute with the Institute for Hoehere Studien in Vienna.

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