2017.12.1503:50:00UTC+00Bundesbank Raises Germany's Growth Outlook

Germany's central bank raised its growth projections but the pace of expansion is forecast to slow through 2020.

The largest euro area economy is forecast to grow 2.6 percent this year and 2.5 percent in 2018, Bundesbank said Friday. The projection for 2017 was revised up from 1.9 percent and that for 2018 from 1.7 percent.

Similarly, the outlook for 2019 was lifted to 1.7 percent from 1.6 percent estimated in June. The growth is forecast to ease to 1.5 percent in 2020.

Bundesbank said the economy is experiencing a strong upswing.

However, Bundesbank President Jens Weidmann said this broad-based, robust economic upswing is reaching an increasingly mature state, which means that the pace of growth is likely to slow in the medium term and converge towards that of potential growth.

Inflation rose considerably to 1.7 percent on average for 2017 owing to markedly higher crude oil prices. According to Bundesbank, inflation is set to remain high until 2019 and could rise to 1.9 percent in 2020.

Driven by exceptionally good economic development and the low interest rates, the fiscal surplus would rise to around 1.5 percent of GDP, the bank noted.

Weidmann said it is likely that once a new federal government has been formed, additional budgetary burdens will be approved and fiscal policy will therefore be more expansionary.