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Pace of Expansion Remains Slow

Press Release of September 17, 2014

The German economy will grow by 1.5 percent this year. In the coming year, the increase in GDP will be somewhat higher at 1.8 percent. The jobless rate will be 6.7 percent this year but it will rise by three-tenths of a percentage point in the coming year. Inflation will remain moderate in both years; prices will rise by 1.0 percent this year and 1.5 percent in 2015. Global economic growth was far more sluggish in the first half of 2014 than throughout 2013. While industrialized countries forged ahead more strongly in the second quarter after a poor start to the year, the pace of expansion in emerging economies has fallen slightly. After a weak first half, the pace of growth of the global economy is likely to increase somewhat. The gradually improving situation on the labor market, particularly in industrialized countries, will soon result in rising wages. Along with low inflation rates, this should stimulate consumption and also investment activities by companies. In Europe and in particular in the Eurozone, growth will be slow as high public and private indebtedness weighs on demand. Moreover, geopolitical risks are a drag. Overall, the average annual growth rate of the global economy will reach 3.4 and 3.8 percent in 2014 and 2015, respectively. The German economy will continue its recovery although the dynamic should remain moderate as a result of the sluggish world economy and geopolitical tensions, and only gather speedslowly. In particular foreign trade and investment will grow only slightly. Next year, when geopolitical risks are assumed to have vanished, the German economy will re- gather its moderate pace of expansion. Despite geopolitical risk, growth impulses are coming mainly from increasing foreign demand. In the wake of rising domestic demand, imports will develop equally dynamically. The current account balance surplus will rise slightly to a good seven percent. Investments which marked a tangible upward trend in the winter months of 2013 and 2014 will be hampered by the uncertainty but remain positive over the forecast period as a whole. The prolonged favorable situation on the labor market will stimulate consumption appreciably. Jobs will continue to be created in the course of expanding production, albeit with some loss of momentum. Companies are also meeting the increasing demand by making their employees work longer. Altogether, employment will increase by 330 000 persons this year and by 120 000 persons next year. The number of unemployed will fall slightly this year to 2.91 million. Next year, it will increase slightly to 3.06 million, mainly due to migration and changes in work behavior. As in 2013, the public deficit will remain at 0.3 percent of nominal GDP in both years of the forecast period. The structural surplus this year is 0.7 percent and 0.5 percent next year.