BERLIN (Reuters) - The Ifo institute on Wednesday confirmed its forecasts for the German economy to grow by 2.6 percent this year and by 2.1 percent in 2019 but said the debate about tariffs in transatlantic trade was weighing on business sentiment.
Sticking to the growth forecasts it had made for Europe’s largest economy in December, Ifo said: “Huge income tax reductions in the USA and the robust economic upturn in the euro zone are boosting demand for German goods and services.”
It said the debate about introducing or raising tariffs in transatlantic trade, along with the euro’s appreciation, was dampening morale among companies.
The coalition government of Chancellor Angela Merkel’s conservative bloc and the Social Democrats - sworn in earlier this month - is having a temporary stimulative effect because it has agreed to boost state spending, particularly in the coming year, Ifo said.
However, Ifo said the government’s tax reform plans were disappointing and an answer was still needed to a significant reduction in corporate tax rates in the United States as well as France and Britain.
Reporting by Michelle Martin; Editing by Andrea Shalal