Germany Raises Growth Forecasts

        BERLIN--Germany is more optimistic about its economic growth outlook because private consumption is strong and unemployment levels are low, reinforcing the country's stance as Europe's economic powerhouse.
        The economics ministry Wednesday raised its forecast for economic growth this year to 1.8% from an earlier forecast of 1.5% and predicted 1.8% growth for 2016, compared with 1.6% seen previously. The economy grew by 1.6% last year.
        "The German economy is enjoying an upswing. On the back of a persisting good labor market performance with rising wages and increasing employment, Germany is moving along a solid growth path," Sigmar Gabriel, minister for economics and energy, said in a statement. "The upswing's main pillar is private consumer spending, which makes this upswing different from previous ones."
        For years, exports had been the German economy's main driving force while, contrary to many other European countries, German consumers were reluctant to spend. But this has changed thanks to low unemployment and higher income levels. The government now expects German private consumption to accelerate by 2.0% this year, after 1.2% growth in 2014, and by 1.6% next year.
        The government's higher forecast was widely expected because low oil prices and the weaker euro are also expected to stimulate to Europe's largest economy.
        With its new forecast, the government remains roughly in line with forecasts given by other institutions and think thanks. The International Monetary Fund last week predicted 1.6% growth for this year and 1.7% for 2016. Germany's leading economic think tanks, however, are more optimistic. In a joint report published last week, they said Europe's largest economy would grow 2.1% this year and 1.8% in 2016 thanks to weak oil prices and a weaker euro.
        The ministry expects 300,000 new jobs to be created this year and an additional 130,00 in 2016, with the workforce reaching a record high of 43.1 million.
        The global economy is seen accelerating slightly while the eurozone is expected to post "slightly higher" growth rates, the ministry said.
        The weak euro is boosting Germany's export outlook but imports will outperform foreign trade due to the strong domestic economy.
        The ministry expects exports to rise by 4.7% this year, from 3.9% last year, and by 4.5% in 2016 while imports are seen increasing by 5.7% in 2015 after 3.4% in 2014 and by 5.1% in 2016.
        Write to Andrea Thomas at andrea.thomas@wsj.com
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        (END) Dow Jones Newswires

        April 22, 2015 05:30 ET (09:30 GMT)

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