Domestic demand boosts German growth at 2015 year-end

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Berlin, Feb 12 (IANS) Boosted by domestic demand, the German economy expanded by 0.3 percent in the final quarter of 2015, official data showed on Friday.

The growth pace was the same as in the third quarter and in line with economists’ expectation, Xinhua reported.

“The economic situation in Germany in 2015 was characterised by solid and steady growth,” said German federal statistics office Destatis. In both first and second quarters of last year, Europe’s biggest economy expanded by 0.4 percent.

Destatis attributed the growth at the year-end mainly to domestic demand. Government spending increased markedly during the last three months, private consumption rose slightly, investment in construction sector also made a notable contribution, it said.

Net exports, Germany’s traditional driving engine, however, weighed on the growth as both exports and imports declined.

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The statistics office confirmed its preliminary calculations that the German gross domestic product (GDP) increased by 1.7 percent over the whole year of 2015.

“Without any doubt, the performance of the German economy since 2009 has been impressive. In 27 quarters, the economy only shrank three times,” said ING-DiBa bank’s chief economist Carsten Brzeski.

However, he warned that the German economy would encounter stronger headwinds this year mainly due to global growth weakness but also to refugee crisis and increasing political uncertainty.

“Looking ahead, the year 2016 could be more challenging for the German economy than many had expected,” Brzeski said in a note.

Thanks to stable labour market, increasing wages, low interest rates and falling energy prices, German consumers’ willingness to loosen their purses stood at a high level.

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The influx of refugees, nearly 1.1 million in 2015 and a similar number in 2016, also stimulated government spending on accommodating and integrating the newcomers.

Economists and business groups, however, were concerned about a lack of investment inside the country and uncertainties around factors which currently seemed positive for exports such as a weak euro and low oil prices.

In last month, the German government cut its forecast for economic growth in current year to 1.7 percent from 1.8 percent.

It pledged to strengthen public investment, support the digitalisation in the industry and take measures to stimulate private investment in a bid to ensure that “Germany will also be a global leading economic and industrial location in ten years.”

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