The International Monetary Fund (IMF) has cut its 2018 forecast for German GDP growth to 2.2 per cent, saying the rising protectionism and the threat of a hard Brexit had exposed the economy to significant short-term risks.
The Washington-based lender, whose previous prediction from April was 2.5 per cent, edged its 2019 forecast up to 2.1 per cent from 2.0 per cent, reports Reuters.
“Short-term risks are substantial, as a significant rise in global protectionism, a hard Brexit, or a reassessment of sovereign risk in the euro area, leading to renewed financial stress, could affect Germany’s exports and investment,” it said in a report.
President Donald Trump has announced tariffs on a wide range of US imports that threaten to unleash a global trade war, and London and Brussels remain at odds over the terms of Britain’s looming departure from the European Union.
The IMF welcomed plans by Chancellor Angela Merkel’s new coalition government to raise public investments and support long-term growth, but it said Berlin could do more.
Given Germany’s rapidly ageing society, IMF directors recommended further expanding public investment in infrastructure and education as well as setting more incentives for private investments.
“Such measures would bolster productivity growth, further lift long-term output, and reduce Germany’s large current account surplus,” it said.
The surplus fell to 8.0 per cent of economic output last year from 8.5 per cent in 2016, but is expected to rise again to 8.3 per cent this year, the IMF said.