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Bundesbank Raises German Growth Projections

The Bundesbank on Friday lifted its growth projections for Germany and said the economy has picked up momentum largely supported by private consumption.

Releasing its new semi-annual projections, the central bank said it now expects the gross domestic product to grow 0.5 percent this year, up from the 0.3 percent growth predicted in June.

Growth is seen at 1.7 percent in 2014, better than the 1.5 percent expansion projected earlier. The economy is forecast to grow 2 percent in 2015.

"The German economy is in good shape, Bundesbank President Jens Weidmann said. The unemployment rate is low, employment is rising, and wage growth is returning to normal, he said.

Weidmann also noted that interest rates are at a low level. These factors are supporting private consumption and driving housing construction, the policymaker said, adding that external trade has been weakening of late.

However, he expects exports to pick up with the cyclical situation becoming brighter in the industrial countries and the emerging improvement in the euro area.

Without incorporating the effects of the new government's coalition agreement, the budget balance is expected to show a surplus of just under 0.5 percent of GDP in 2015.

The Bundesbank retained its inflation forecast for this year at 1.6 percent. The bank slashed its inflation outlook for 2014 to 1.3 percent from 1.5 percent predicted in June. The rate of inflation is expected go up again to 1.5 percent in 2015.

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