Bundesbank ups growth forecasts but sees slowdown on horizon

Germany’s central bank significantly lifted its growth forecasts for Europe’s top economy in 2017 and 2018 on Dec. 15, but warned the momentum would slow in the following years due to labor shortages.

Germany will expand by 2.6 percent this year and 2.5 percent in 2018, the Bundesbank said, upgrading its June forecast that had predicted growth of 1.9 and 1.7 percent respectively.

“Germany’s economy is experiencing a strong upswing,” the bank said in a statement.

The momentum is being powered by strong foreign demand for “made in Germany” goods, while record-low unemployment at home is boosting domestic consumption, it added.

But the robust growth streak will weaken in 2019 and 2020 to 1.7 and 1.5 percent as the economic cycle reaches “an increasingly mature state.”

“The further growth opportunities are being constrained, above all, by strong capacity utilization and, in particular, labor shortages,” said Bundesbank chief Jens Weidmann, predicting that export activities will be especially hit.

The German government also recently upgraded its economic estimates, and is now expecting 2.0 percent growth this year and 1.9 percent in 2018.