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Germany's business outlook still favourable: finance ministry

[FRANKFURT] The outlook for German companies may have clouded over somewhat as a result of external economic risks, but it still remains favourable, the finance ministry wrote on Friday.

"The external economic risks are probably one of the main reasons why companies are looking more cautiously to the coming six months. But the overall economic conditions for companies are still favourable," the ministry wrote in its February monthly report.

Germany, Europe's biggest economy, expanded by 0.3 per cent in the final quarter of last year, the same rate of growth as in the preceding three months, official data showed last week.

Following growth of 0.4 per cent in both the first and second quarters, gross domestic product (GDP) grew by 1.7 per cent across the year as a whole, with the expansion driven primarily by government and household spending.

Overall, domestic demand has now taken over from exports as the primary growth driver.

And domestic demand was likely to keep that role, not least thanks to the arrival of more than one million refugees in Germany last year, the ministry said.

"Against the backdrop of rising employment and the challenges of refugee migration, private and public spending should continue to rise," the ministry predicted.

"The situation on the labour market also remains positive at the start of the year. Employment is on the increase and unemployment has fallen more sharply again than in previous months," it said.

For 2016, the government is projeting growth of 1.7 per cent.