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FRANKFURT, Dec 9 Germany's economy is on a solid
upward path but weakening consumption growth and labour market
bottlenecks could constrain its expansion in the coming years,
the country's central bank said on Friday.
The state budget, already in the black, will continue to
generate surpluses without new spending measures and state debt
could fall to 60 percent of GDP, the government's coveted level,
by 2019, the Bundesbank said in its fresh biannual economic
The euro zone's biggest economy has been the engine of the
bloc's recovery and the European Central Bank has repeatedly
called on Germany to spend more to give the still fragile
expansion a boost.
But the government, facing elections next fall, has rejected
those calls, making fiscal prudence a key plank in its campaign.
"The highly favourable setting for household consumption at
present looks set to turn slightly gloomy in the years ahead as
demographic constraints soften employment growth and higher
rates of inflation erode consumers' purchasing power," the
The economy is likely to face increasing labour supply
shortages with the working age population continuing to shrink
and even the influx of refugees is likely to have only a minor
impact on the labour market in the coming years, the Bundesbank
Foreign trade, held back by weak global demand, will slowly
pick up pace but this will not be enough to fully offset the
slight downturn in domestic activity, the Bundesbank added.
Still, it lifted its adjusted GDP growth forecast to 1.8
percent for this year and next from 1.6 percent predicted in
June, as the euro zone has proved to be more resilient to recent
shocks than feared.
Growth will then slow to 1.6 percent in 2018 and 1.5 percent
in 2019, it added.
(Reporting by Balazs Koranyi; Editing by Mark Trevelyan)