Ifo Economic Forecast 2011: Upswing continues at a slower pace

On 14 December 2010 the Ifo Institute presented its forecast for 2010 and 2011 at its pre-Christmas press conference. The recovery in the German economy that began more than a year ago continued with considerably dynamism. With the initial stimulus coming from abroad, over the past three quarters the domestic economy has increasingly gained importance. A key factor was the investment stimulus that resulted from historically low interest-rate levels. Driven by a strongly expanding industrial core, total economic output in the final quarter of 2010 will accelerate slightly by 0.8%, seasonally and calendar adjusted. On average for 2010, real GDP will expand by 3.7%. For the coming year the "traffic lights" of economic activity remain "green" for Germany, with GDP increasing by 2.4% - with a 67% confidence interval of between 1.4% and 3.4%. The decisive factor here is the development of domestic demand. With all this, the employment situation should improve, and the unemployment rate should fall to 7.0%. In the wake of the upswing, consumer prices will increase somewhat, but at a likely 1.7% the inflation rate will still be below the target of the European Central Bank. The budget deficit, which this year was 3.5% of GDP, will fall to 2.3% next year as a result of the continuingly good economy, the consolidation measures within the framework of the "future package" and the savings in statutory health insurance.