German Govt/IMF -3: Fiscal Policy, Euro Limit 2003 Growth
The IMF report's concluding statement, released later by the finance
ministry, confirmed the latest growth projections.
In the statement, the IMF echoed claims by the government and leading
economic think tanks that the German economy, which has been underpinned by
exports, will benefit from stronger domestic demand.
"Recent indicators and surveys of business confidence suggest that growth
will pick up in the second half of this year," the IMF said.
"As exporters continue to benefit from the improved external environment,
first the inventory cycle, and then consumers enjoying greater purchasing
power, should boost domestic demand," it added.
Still, the IMF said several factors - including government budget austerity
and the euro's higher foreign exchange rate - would restrain growth in 2003.
"Growth momentum in 2003 is likely to be tempered by tight macroeconomic
policy conditions: the planned fiscal consolidation will dampen domestic demand
growth; low bank profitability will prompt more selective lending; and the
recent euro appreciation, if sustained, will restrain exports," the IMF said.
"Taking these factors into account, we project growth of 2.3% in 2003,
following 0.8% in 2002. We expect inflation to remain around its current low
level," it added.
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