German '5 Wise Men' trim 2016 growth forecast

Global uncertainties will shave around 0.1 percentage point off growth in Germany this year, but Europe's economic powerhouse remains in a moderate uptrend, an expert panel said Wednesday.

The German Council of Economic Experts, known as the five "wise men", said it is forecasting gross domestic product (GDP) growth of 1.5 percent this year -- fractionally lower than their previous prognosis from last November -- and 1.6 percent growth in 2017.

The panel is actually made up of four men and one woman and advises the government in economic affairs.

"In view of the slightly weaker external economic environment, our previous forecast for 2016 has been revised downward slightly," the economists said.

Nevertheless, "the moderate uptrend is continuing, driven by domestic consumer spending," they insisted.

The labour market remained robust, fiscal policy was expansive and monetary policy was "extremely accommodative," the experts said.

"The turbulence seen in the international financial markets at the beginning of the year does not point to a global economic contraction," the panel continued.

The sharp drop in financial markets in January was largely due to a decline in banking stocks that reflected investor concern about banks' profitability, the experts said.

- Refugees 'a huge challenge' -

The massive influx of refugees remains a "huge challenge" for German economic policy, the panel said.

Bottlenecks in the asylum application process were currently leading to delays in integrating the newcomers into the labour market and that meant the huge numbers of new arrivals were not pushing up the headline jobless rate for the time being.

The panel estimated that by the end of 2017, around 360,000 refugees with approved asylum status will be registered as being available for work, but "a large proportion" of these will remain unemployed.

Despite the challenges, the government should be able to cover additional spending in 2016 and 2017 related to the refugee crisis "without new debt or tax increases," the panel said.

Taking in, housing and training the asylum-seekers, as well as teaching them German and finding work for them is expected to boost government spending. But at the same time, the robustness of the economy and low interest rates are expected to raise revenues so that Berlin is sticking to its target of a balanced budget at least until 2020, according to the government's preliminary 2017 draft budget.

At a news conference in Berlin to present the budget, finance minister Wolfgang Schaeuble pointed out that investment was on the increase in key areas such as infrastructure, defence, welfare policy and education "and that without taking up new debt."

"One of the main focuses of this budget and of our fiscal planning is, of course, security inside and outside our country," the minister said, pointing to the "terrible attacks in Brussels."

In all, around 10 billion euros ($1.1 billion) have been earmarked for various costs related to refugees, such as language teaching courses, housing construction and increased spending on police.

"We in Germany will help the refugees and will do everything we can to integrate them as best and as fast as we can," Schaeuble said.

Here, too, the aim was to finance such measures "where possible without any new debt," the minister reiterated.