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ECONOMY

Economic growth fails to match hopes

The German economy grew by 0.3 percent in the first quarter of 2015, slightly slower than expected, data published by the federal statistics office Destatis showed on Wednesday.

Economic growth fails to match hopes
Photo: DPA

Gross domestic product (GDP) expanded by 0.3 percent in price, calendar and seasonally adjusted terms in the period from January to March compared with the preceding three months, Destatis said in a statement.

Analysts had been pencilling in first-quarter growth of 0.5 percent after GDP expanded by 0.7 percent in the fourth quarter of 2014.

“The German economy continued on its growth path, but at a slightly slower momentum” in the first quarter, Destatis said.

The main growth driver was domestic demand, with both private households and the public sector increasing spending.

Investment also increased, particularly in construction and equipment.

Exports also increased slightly and imports rose more strongly.

On a 12-month comparison, GDP grew by 1.1 percent in the January-March period compared with the same three months a year earlier, Destatis said.

The statistics office said it would publish a more detail breakdown of the different GDP components on May 22.

Meanwhile, inflation crept higher in April with consumer prices rising by 0.5 percent year-on-year, final data showed.

The previous month, the consumer price index had risen by 0.3 percent on a 12-month basis, Destatis said.

The final data represent a fractional upward revision from the 0.4 percent originally reported at the end of April.

Using the Harmonised Index of Consumer Prices (HICP) — the yardstick used by the European Central Bank — inflation in Germany rose by 0.3 percent percent year-on-year in April, still way under the ECB's annual inflation target of just below two percent.

The data nevertheless appear to confirm that the ECB's monetary policy measures are slowly beginning to push up inflation.

In March, the ECB embarked on a massive trillion euro bond purchase programme to ward off deflation and end stagnation in the eurozone economy.  

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ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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