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ECONOMY

Central bank upgrades German growth forecast

The German central bank or Bundesbank on Friday said it was upbeat about the outlook for expansion in Europe's biggest economy, upgrading its growth forecast for 2017.

Central bank upgrades German growth forecast
A worker installs the rear window on a Volkswagen car at the manufacturer's factory in Wolfsburg, Lower Saxony. Photo: DPA

“The Bundesbank's economists expect Germany's real gross domestic product (GDP) to grow by 1.7 percent this year, followed by a rise of 1.8 percent in 2016 and 1.7 percent in 2017,” the central bank said in a statement.

The forecasts for 2015 and 2016 are unchanged from the bank's earlier projections, while it had been pencilling in growth of 1.5 percent for 2017.

“The German economy is currently following a growth path that is primarily underpinned by domestic demand,” the statement said.

“The main drivers are the favourable labour market situation and substantial increases in households' real disposable income, though foreign trade is currently being hampered by frail demand from the emerging market economies,” said Bundesbank chief Jens Weidmann.

“But with export markets outside the euro area expected to rebound and economic growth within the euro area gaining a little more traction, the healthy underlying state of the German economy should stand out even more clearly over the next two years,” Weidmann said.

Despite the expansionary effect which migration was having on the labour supply, “the labour market will experience shortages to a growing extent, driving up wage increases,” it said.

Turning to the outlook for public finances, the central bank said Germany's general government budget was expected to post “a higher surplus in the current year and record a more or less balanced fiscal outcome in 2016 and 2017.”

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ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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