Germany lowers growth forecast for 2016 as foreign trade drags

Germany has trimmed its growth forecast for 2016 as a slowdown in the emerging market is dampening exports, leaving domestic demand as the sole as the sole propellant of growth this year and probably beyond. Presenting the government's annual economic report, Vice Chancellor Sigmar Gabriel said on Wednesday the economy was in good shape but the government and companies alike needed to beef up investment to keep Germany competitive.

"We're doing well in Germany, but for that to remain the case we need to invest more," Gabriel told a news conference.  In 2015, state spending rose to nearly 30 billion euros ($32.63 billion), pushing up the public sector investment ratio to 20.45 percent of GDP, slightly above the international OECD average, he noted.

The report underlined a fundamental shift in Germany's economy away from a reliance on exports and towards more domestic-driven growth as demand from China and other emerging markets is waning. Berlin expects imports to rise at a faster rate than exports throughout 2016, meaning net foreign trade is likely to clip off 0.4 percentage points of economic growth. In its annual economic report, the government expects private consumption and state spending to drive economic growth by 1.7 percent this year, on a par with the 2015 performance, but below a previous forecast of 1.8 percent.