The German government on Wednesday raised its economic growth forecast for the year to 1.4 percent amid a recovery in exports, but cautioned that there is still great uncertainty over the outlook.
The outlook was up from the 1.2 percent growth forecast by the government in mid-October, and Economy Minister Rainer Bruederle said he still is staying "at the lower end of forecasts."
The economy technically emerged from recession in last year's second quarter but still contracted by 5 percent overall in 2009, by far the worst performance since World War II.
Economic recovery abroad, particularly in Asia, is expected to help German exports — the traditional motor of Europe's biggest economy — although they won't return to pre-crisis levels in 2010.
The government predicted a 5.1 percent increase in exports this year, following last year's steep 14.1 decline. It forecasts that imports will rise by 3.4 percent, recovering from an 8.9 percent fall in 2009.
However, Bruederle said that private consumption at home won't contribute to growth this year.
He blamed that in part on a temporary car-scrapping bonus program set up by the government last year, which he said prompted people to move forward their purchases. Bruederle's Free Democrats were in opposition until late last year and opposed the plan.
Bruederle's ministry predicted that Germany's unemployment rate will average 8.9 percent this year, up from 8.2 percent in 2009.
Forecasts for this year have to viewed "with caution," Bruederle said.
Economic indicators generally are pointing upward, but production capacity remains underutilized, meaning that "uncertainties over the further course of economic development are high," he said.
The Ifo institute's closely watched business confidence survey posted its 10th consecutive monthly rise this week. However, a more volatile index of investor confidence has been slipping, and fears of unemployment have pushed down consumer confidence.
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