The German economy is on the upswing, said a new economic forecast of the Institute of Macroeconomic Research (IMK) in the Hans Boeckler Foundation on Wednesday.
According to the new economic forecast of the IMK, the German gross domestic product (GDP) will grow by 1.8 percent this year, and for 2015, the IMK expects an acceleration of growth to 2.3 percent.
Meanwhile, the researchers also see the altered structure of economic growth in Germany as a positive development, as they said, unlike in the past decade, the upswing is no longer dependent on foreign trade, but is driven essentially by domestic demand.
The private consumption expenditure, which will rise by 1.6 percent in 2014 and 2.4 percent in 2015, will contribute about half of the economic growth, said IMK.
And the driving force behind this development is the disposable income, particularly the gross wages, which will rise by 3.5 percent in 2014 and by 4 percent in 2015 in nominal terms, as the forecast said.
Private investment will also gain momentum because of the improved sales prospects, said the IMK.
German companies are investing heavily again following a long period of restraint, as their equipment investment will grow by 7.9 percent in 2014, and gain as much as 9.7 percent in 2015, according to the forecast.
As a result, the German labor market will benefit from the improved economic environment and the researchers assume that the number of employed will increase by 300,000 persons in 2014 and by 240,000 people in 2015.
Meanwhile, the unemployment rate will fall slightly to 6.7 percent this year and to 6.5 percent next year.
According to IMK, the price increase will only accelerate slightly in the wake of the strong economy in Germany, so the researchers predict a very low inflation rate of 1.1 percent for this year and 1.3 percent for the coming year.
However, the IMK also warned that if the European countries mostly affected by the crisis fail to recover economically, a loss of confidence would threaten with a significant impact on the investment behavior of firms in Germany.
And deflationary pressures in the euro area represent another risk source, said the IMK.