Germany’s economy may expand less than expected this year, according to Economy Minister Sigmar Gabriel. The government had forecasted the economy to expand 1.8 percent in 2014.
However, Gabriel insisted that the country is much better than its euro-area counterparts.
In an interview with the Deutschlandfunk radio, Gabriel said that the geopolitical tensions in Ukraine had affected investor confidence in Germany.
“We could see growth this year lower than our forecast of 1.8 percent… but we still have very strong growth momentum and the labor market is robust,” said Gabriel, according to Reuters.
The German economy powered faster than expected in the first quarter, boosted by an unusually warm winter that promoted construction activity. It shrunk 0.2 percent in the second quarter, triggering concern of the risk of recession by some quarters.
Besides the tensions in Ukraine, the weak euro-area economic growth has been blamed for the slowdown of German economy.
Meanwhile, the Dallas Federal Reserve Bank president Richard Fisher expects the U.S. to fall behind the curve on inflation due to wage pressures.
However, he said that U.S. economy was expanding faster as it seeks to recover from the aftermath of the 2008 economic recession.
He said that some regions such as Texas were experiencing rapid growth. Texas has the advantage of pro-business government and a diversified economy that has resulted in rapid growth in job creation and surging immigration. Fisher said the growth has resulted in wage pressure.
Fisher, a hawkish member of the U.S. Federal Reserve, expects the interest rates to be increased sooner than later and warned the market to be ready for when interest rates are raised. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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