Bundesbank raises growth forecasts, predicting solid upturn

[FRANKFURT] The Bundesbank raised its German growth forecast for this year and next, arguing that the "solid upturn" was continuing, even though increasing labour market bottlenecks could constrain growth and lead to wage inflation.

The German central bank raised its GDP growth projection to 1.8 per cent in both 2016 and 2017 but warned that this was above the economy's potential so the labour market bottleneck could intensify, exacerbated by unfavourable demographic trends such as the ageing of the population.

The bank added that the German budget is likely to keep generating surpluses in the coming years without new spending measures and the government debt to GDP ratio could fall back to 60 per cent in 2019.

REUTERS