German economic growth is set to accelerate, rising by 1.8 percent this year and 2.0 percent next year, according to the economy ministry.
That is a big improvement on last year when GDP expanded just 0.4 percent, amid weak exports and as some German firms held back on investment.
However, the ministry did warn the outlook could be affected by any escalation of the crisis in Ukraine, which also played into a ZEW survey showing German analyst and investor sentiment down again. It fell for the fourth month in a row in April.
Higher domestic demand within Europe’s largest economy should help struggling eurozone states export their way out of the crisis and thereby reduce some of the region’s economic imbalances.
Domestic demand will drive growth, climbing by 1.9 percent this year and by 2.1 percent next year as households spend more and investment in construction and equipment rises, the ministry said.
Some workers have secured strong pay hikes in wage negotiations and a strong labour market, moderate inflation and low interest rates are encouraging Germans, traditionally a nation of savers, to splash their cash.