Ifo raises German growth forecast
MUNICH, Germany (Reuters) -- Germany's influential Ifo economic research institute on Friday raised its prediction for German economic expansion next year by a tenth of a point and said growth prospects were the most favorable in a long time.
Europe's biggest economy will probably grow 1.8 percent in 2004, after stagnating this year, according to the Munich-based think tank's latest twice-yearly economic forecasts.
"It's all systems go for the German economy,'' Ifo President Hans-Werner Sinn said at a news conference in Munich.
Ifo is one of Germany's six leading research institutes, which in October jointly forecast 2004 German growth of 1.7 percent.
A package of tax cuts and welfare reforms set to win parliamentary approval on Friday will add a fifth of a percentage point to 2004's rate of growth, Ifo said.
Its forecast assumed the average exchange rate of the euro against the U.S. dollar will be around $1.25 next year, partly due to demand for euro bank notes in eastern Europe and elsewhere in the world.
Ifo predicted exports would grow 5.7 percent next year, but said uncertainty about how far Europe's single currency will strengthen further was clouding the outlook.
The euro has surged to a series of record highs against the dollar in recent weeks and was trading at around $1.24 at 1055 GMT on Friday.
Germany's budget deficit will narrow to 3.5 percent of gross domestic product next year, exceeding the European Union's limit of three percent of GDP for a third straight year, the institute forecast.
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