Ifo Economic Forecast 2014/2015: German Upturn Continues

Worldwide economic growth picked up slightly in summer 2013. This was mainly due to developments in advanced economies. The recoveries in the USA, Britain and Japan gained impetus, while the euro area emerged from a recession that lasted almost two years. Although emerging economies posted higher growth rates than advanced economies, the economic dynamic nevertheless remained relatively weak by historical standards. All in all, aggregate world economic production is expected to increase by 2.9% this year and 3.3% next year. A key risk for the world economy remains the fragile situation in the euro area. Despite the reform measures recently introduced by many member states, several of these countries are still too expensive to be competitive. As in recent years, economic upheavals could recur, just as they have over the past three years. The economic upturn in Germany continues. Real domestic product is expected to increase by 2.0% this year and by 2.2% in 2014. As in past years, the upturn will be driven by the domestic economy. Investments in new equipment will grow at a faster pace, the high production capacity utilisation rates call for investment in replacement and expansion. Construction investment will also continue to increase further. Private consumption is also expected to increase at the same pace as rising real income.