German Economy Expanding By 1.7% In 2006

The German economy, the biggest in the 12-country eurozone, is set to expand by 1.7% next year, nearly double the expected growth of 0.9% this year, Ifo research institute forecast on Dec. 19. Previously, Ifo had been predicting in German growth of 1.2% in 2006.

And while growth would once again be driven primarily by exports, private consumption, traditionally the Achilles' heel of the German economy, was expected to pick up in the second half of 2006.

"Investment in equipment will expand noticeably; construction investment will not decline further; and private consumption will also pick up somewhat, particularly in the second half of the year as consumers bring forward purchases ahead of the planned rise in value-added tax (VAT)," it said.

Overall, gross domestic product (GDP) was expected to expand by an annual average 1.7% next year and even by as much as 1.9% when adjusted for calendar effects such as the fewer number of working days.

Copyright Agence France-Presse, 2005

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