German government cuts 2006 growth projection
21 October 2005, BERLIN - Outgoing Economics Minister Wolfgang Clement officially cut Germany's economic growth projection Friday to 1.2 per cent for next year, citing the impact of the world price of oil.
21 October 2005
BERLIN - Outgoing Economics Minister Wolfgang Clement officially cut Germany's economic growth projection Friday to 1.2 per cent for next year, citing the impact of the world price of oil.
The move follows a report by Germany's six leading economic institutes on Thursday which downgraded growth prospects for Europe's biggest economy to the same margin, 1.2 per cent for 2006.
The government had until now been predicting growth of 1.6 per cent next year.
Both Clement and the six institutes say German GDP will expand by a weak 0.8 per cent this year rather than the 1.0 per cent predicted back in the spring.
Clement said the forecast had to be altered because of the rising cost of energy, particularly of crude oil.
His autumn report forecast that Germany's unemployment rate would fall slightly next year and the number of jobs in the economy would increase. The figures will now be used by German budget planners, who are to estimate next month how much tax will be collected next year.
A major challenge for Clement's designated successor, Christian Social Union leader Edmund Stoiber, will be to revive the economy.
Social Democrat Clement, who remains as caretaker till a coalition policy paper has been settled, repeated Friday his government's contention that the current world oil price was not justified by fundamental data but was speculative.
He appealed to the United States to increase construction of refining capacity so as to bring more motor fuel to the market.
"The lack of refining capacity in the United States is a long- standing problem and urgently needs solving," Clement said.
The minister also rejected suggestions that euro interest rates might have to be hiked to prevent a return of inflation. Five of the six economic institutes had forecast Thursday that eurozone interest rates would rise half a percentage point next year.
The current price pressure was "of a purely temporary nature", Clement said, demanding that the monetary authorities at the European Central Bank keep their focus on the lack of growth in Europe.
Subject: German news