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The Week in Germany: Business and Technology December 15, 2006 Economists Expect Only Limited Fallout from VAT Rise German economists expressed confidence on Thursday that Berlin's January hike in value-added tax would have only a limited impact on the solid growth rate that has emerged in Europe's biggest economy this year. "The current climate is fantastic," said Hans-Werner Sinn, president of the Munich-based ifo economic institute, which released its latest report on the Germany economy. "We are extraordinarily optimistic." Several German economic think tanks revised their economic forecasts as the nation's unemployment level continues to drop. The release of a raft of upbeat economic reports coincided with Germany's premier stock market climbing to its highest level in almost six years. Powered by this year's economic upturn and a solid round of corporate earnings reports, the Frankfurt stock exchange key index, the DAX, edged up 0.2 percent to 6552 points, its highest level since February 2001. Given the German government's plans to increase the nation's value-added tax by three percentage points to 19 percent, signs that growth in the US could be slowing and a round of interest rate hikes, economists had projected growth to slump in Germany in 2007. But as the year draws to a close a growing number of economists believe that Germany's current economic momentum will help to propel it into the new year. Growth is expected to climb to up to 2.7 percent this year with business confidence in the country having risen to a 15-year high and the mood among consumers at a five-year high. Instead of a previous forecast of 1.7 percent, the ifo now expects the
German economy to grow by 1.9 percent in 2007. The ifo is predicting a
2.3 percent growth rate in 2008. And the Kiel-based Institute for the
World Economy (IfW) doubled its forecast for 2007 from 1.0 to 2.1 percent.
The Federation of German Banks also raised its 2007 forecast from 1.0
percent to between 1.25 and 1.5 percent. (dpa) Links:
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