By Maria Martinez 
 

The ifo Institute on Thursday confirmed its 1.1% growth forecast for the German economy in 2020 and revised its growth forecast for 2021 upwardly by 0.1 percentage points to 1.5%.

"At present, a recession in the general economy is very unlikely," said Timo Wollmershaeuser, head of forecasts at the ifo Institute.

Mr. Wollmershaeuser said fiscal policy is partly responsible for the gradual recovery of the German economy, with boosts coming from tax reliefs, social-insurance contributions and an increase in public-investment expenditure.

According to the ifo Institute, the measures amount to almost 25 billion euros ($27.64 billion) per year, increasing GDP growth by 0.25 percentage points. The German government's surplus will shrink to EUR30.5 billion in 2020, from EUR55 billion this year, the institute said.

"The German economy remains splintered," Mr. Wollmershaeuser said.

While the performance of domestically oriented service providers and construction companies continues to improve, industry remains caught in recession, he said. Trade tensions are hitting German industry particularly hard, with the auto sector facing difficult challenges, he added.

"However, the most recent order intake levels, business expectations in the manufacturing sector, and a further increase in goods exports in October indicated that the free fall has stopped and that, gradually, light is appearing at the end of the industrial economic tunnel," Mr. Wollmershaeuser said.

The ifo Institute expects unemployment to decline further to 2.25 million in 2020, bringing the unemployment rate down to 4.9% in 2020 and 4.8% in 2021.

Germany's current account--the balance of exports, imports and transfers--will continue to show a large surplus, reaching EUR271 billion, or 7.7 percent of annual economic output in 2020, the ifo Institute said.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

December 12, 2019 05:20 ET (10:20 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.