Strong Private consumption and government spending have boosted Germany GDP growth rate.

As per available economic data, Germany’s GDP rose by 0.7% in the first quarter of this year thanks to higher construction investment and stronger private consumption.

Analysts have explained the expansion of Europe’s largest economy by saying that the increased government expenditure on refugees along with the ECB’s ultra-low interest rates have helped the economy grow.

“The calculation of consumers is pretty simple: If there are no interest rates on the bank account, then let’s just fill the shopping bag,” said Thomas Gitzel, an economist at VP Bank. He went on to add that companies have also increased investments in the first quarter.

The Federal Statistics Office have also confirmed this preliminary expansion in the economy saying construction investment and consumer spending had each contributed 0.2 percentage points to GDP.

The European Central Bank’s ultra-low interest rates had also encouraged Germans to overcome their traditional aversion of owning houses and flats, with a handful even regarding housing as an attractive investment option.

As per the statistics, the state’s spending for the cost of accommodation and the integration for the influx of refugees, who were more than 1 million in number, contributed 0.1 percentage point to the GDP. The investment made by German companies in plants and machineries have also contributed 0.1 percentage point to the GDP.

As per Stefan Kipar, an economist with Bayern LB, government spending on migrants have also contributed to the growth of Germany’s GDP.

“The higher state spending on refugees is lifting private consumption through the payout of social benefits. And it’s also giving the construction sector an additional push because more refugee shelters are being built,” said Kipar.

For 2016-2017, Germany plans on spending 9.7 billion euros in order to integrate and support the influx of refugees. This will be in addition to the 6.3 billion euros it will be spending on combatting the root problem for the migration from the Middle East and other countries.

This sum of 16 billion euros which Germany will be spending in the coming years is likely to rise to 93.6 billion euros by 2020. Balancing its budget will be a tough port of call for its finance minister.

With China’s economy in ruins, Berlin’s strong economic outlook has acted as a counter balance to the world economy as its strong growth has counterbalanced China’s sluggish economy.

However, its exports have been weaker than its imports and its net foreign trade had a 0.1% percentage point drag on its economy.

The ECB and the German government expect the economy to follow this upward swing at a slow pace.

Germany has forecast a GDP growth rate of 17%, which is on par with its previous year, when the country’s expansion was driven largely by strong private consumption and higher state spending.

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