Berlin - Growing exports and government spending will help to drive Germany along a recovery path next year, the Organization for Economic Cooperation and Development (OECD) said Thursday. Europe's biggest economy will grow by about 1.5 per cent in 2010 after shrinking by 4.9 per cent this year, the OCED predicted in latest economic outlook report. The OECD previously predicted a German growth rate next year of 0.2 per cent.
"The worst is behind us," said OECD analyst Felix Huefner said. "We are now experiencing in Germany a classic export-driven recovery."
Germany climbed out of its deepest recession in a generation during the third quarter underpinned by Chancellor Angela Merkel's 85-billion-euro (127-billion) dollar anti-crisis stimulus package.
But the OECD is expecting only a slow recovery in Germany warning that lengthening jobless queues and the strong euro could undercut the upswing in the nation.
"Over the coming quarters, firms are thus likely to lay off workers and unemployment is projected to increase fairly rapidly," the OECD predicted.
But it expects job losses to be relatively mild compared with the depth of the recession with the German labour market's resilience having been helped by government-backed so-called short-time work contracts.
Without the short-time work contracts, the numbers out of work in Germany would have been 500,000 higher, said OECD labour market analyst Isabell Koske.
Nevertheless, the organization predicted that Germany's unemployment rate will rise to 9.7 per cent next year after averaging 7.6 per cent in 2009.
However, by 2011 the Paris-based organization forecasts that Germany will grow by 1.9 per cent as private consumption stabilizes and private investment picks up.
After falling by a dramatic 14.4 per cent in 2009 in the wake of the impact on global trade of the economic crisis, the OECD predicts that exports will grow by 7.2 per cent in 2010 and by 8.1 per cent in 2011.
Moreover, the OECD expects German economic growth to outpace its partners in the 16-member eurozone.
The OCED is projecting an average growth rate for the eurozone in 2010 of 0.9 per cent and 1.7 per cent in 2011.
Inflationary pressures are also likely to remain weak. After rising by just 0.2 per cent this year,consumer prices are likely to edge up by 1.0 per cent next year and 0.8 per cent in 2011.
Nevertheless, the government's stimulus plans are is likely to help fuel an expansion of the nation's budget deficit,which is set to breach this year the strict 3-per-cent rule of GDP for eurozone member states before rising to more than 5 per cent in 2010, the OECD report said.
