Thinktank cuts German growth forecast

9th March 2005, Comments 0 comments

9 March 2005 , BERLIN - A leading economic research institute on Wednesday cut its already modest growth projection for Germany this year and warned the risks of a recession were growing. The Institute for the World Economy (IfW) in Kiel trimmed its gross domestic product (GDP) growth prediction to 0.6 percent, down from 0.8 percent. Up until now, most analysts have predicted growth of between 0.8 and one percent this year, with the German government sticking to projections of 1.6 GDP growth. Falling forei

9 March 2005 

BERLIN - A leading economic research institute on Wednesday cut its already modest growth projection for Germany this year and warned the risks of a recession were growing.
The Institute for the World Economy (IfW) in Kiel trimmed its gross domestic product (GDP) growth prediction to 0.6 percent, down from 0.8 percent.

Up until now, most analysts have predicted growth of between 0.8 and one percent this year, with the German government sticking to projections of 1.6 GDP growth.

Falling foreign demand for German goods, the high oil price and the strong gain of the euro against the dollar were all combining to hinder growth, said the IfW.

A further big question mark is whether weak domestic demand - a bane for the past decade - is finally starting to perk up.

"The risk of a recession is growing," said the institute which serves on the government's Council of Economic Advisers.

For 2006 the IfW predicted better but still sluggish German growth with GDP expected to expand by 1.3 percent.

German unemployment has soared to 12.6 percent with 5.2 million jobless. In some parts of economically hard-hit eastern Germany the rate is close to 30 percent.

The German economy grew by 1.6 percent last year. Most economists say sustained growth of at least 2 percent is needed in order to make a dent into unemployment.

Germany's next general election is in autumn 2006 and Chancellor Gerhard Schroeder has been banking on his social welfare and tax reforms giving a strong boost to the economy to help his centre-left government clinch a third term in office.

DPA

Subject: German news

 

0 Comments To This Article