The German economy, the major driver of eurozone growth, expanded by 1.9 per cent in 2016, the strongest rate in five years, a preliminary estimate from the Federal Statistics Office showed yesterday,

Europe’s largest economy is benefiting from rising private consumption and increased state spending on refugees, compensating for a weaker contribution from trade amid sluggish demand from major trading partners and emerging markets.

Economists polled by Reuters had expected growth in gross domestic product (GDP) of 1.8 per cent for 2016 after an expansion rate of 1.7 per cent in the previous year. The growth rate of 1.9 per cent matched the highest forecast in the poll.

The Statistics Office said it estimated growth was around 0.5 per cent for the fourth quarter.

“The German economy in 2016 once again defied an entire series of downside risks, thanks to strong domestic demand,” said ING economist Carsten Brzeski, adding that Germany’s biggest risk now was complacency.

“The economy urgently needs new impetus from new structural reforms and stronger public and private investment. It is very unlikely that it will get any of these before the elections,” he said.

Germany goes to the polls for a federal election in September.

A breakdown of the 2016 GDP figures showed private consumption rose by an adjusted two per cent on the year, contributing 1.1 percentage points to the overall 2016 growth rate.

State spending jumped by 4.2 per cent after a rise of 2.7 per cent in 2015. The increased state spending added 0.8 percentage points to the overall growth rate. Investment in machinery and equipment contributed 0.1 percentage points while construction added 0.3 points. As exports rose less strongly than imports, net foreign trade subtracted 0.1 percentage point from the overall growth rate.

Germany’s Ifo economic institute said last month the economy would rebound more strongly than previously expected in the fourth quarter and this growth momentum will carry through into 2017.