New Bundesbank projection: upswing becoming more broad-based

The recovery in the German economy will continue in the next two years following the impressive catching-up process in the current year. The upturn will also become increasingly broad-based. Inflation remains within bounds compatible with stability. This is reported in the Deutsche Bundesbank’s new projection for 2011 and 2012.

Macroeconomic output

According to the Bundesbank projection, price-adjusted gross domestic product (GDP) will rise by 2.0% in 2011 and by 1.5% in 2012 after an estimated increase of 3.6% in the current year. Exports will remain the main driving force behind the upturn, although external impulses will have a growing impact on domestic activity. Investment in machinery and equipment as well as in construction is also being given a boost by low interest rates, while private consumption is benefiting from growing employment and higher wages.

Labour market

Employment is likely to go on rising over the forecast horizon, while unemployment should continue to decline. In 2012, the official unemployment figure is likely to fall below three million. The unemployment rate could decline from 7.5% at present to 6.9%.

Price developments

Over the forecast horizon, consumer prices will probably increase on a scale that is compatible with stability. On average, consumer prices could go up by 1.7% in 2011 and by 1.6% in 2012.

Risk assessment

Downside risks in terms of the projection originate from the persistent uncertainties in the financial markets due to the fragile position of public finances in a number of industrial countries.

The macroeconomic projection for Germany, which was completed on 19 November, also represents the Bundesbank’s contribution to the Eurosystem’s biannual staff projections. It is based on common or harmonised assumptions and an identical projection horizon.

The Bundesbank projection, which also appears in the Monthly Report for December 2010, may be found on the Bundesbank website at