German economy to grind to a halt next year: report

12th October 2011, Comments 0 comments

Germany will slow practically to a halt next year as the eurozone debt crisis takes its toll on Europe's biggest economy, according to a leaked report from the country's top economic institutes.

Growth in Germany will be a mere 0.8 percent in 2012, the four leading think-tanks will say in their forecasts, due to be published on Thursday, but leaked a day in advance to the Frankfurter Allgemeine Zeitung daily.

This would represent a drastic downwards revision. In their previous outlook, published in April, the institutes had forecast growth next year of 2.0 percent.

For its part, the German government has predicted growth of 1.8 percent next year and will unveil its revised outlook next Thursday.

However, for this year, growth is expected to be slighter higher due to a strong first half, the institutes will say, according to the newspaper which cited "well informed sources."

According to the revised forecast, the economy will expand 2.9 percent in 2011, slightly faster than the 2.8 percent seen in April.

Berlin is also counting on a 2.9-percent growth rate, following a strong year in 2010 in which output expanded 3.6 percent.

Germany, Europe's powerhouse economy and the world's second biggest exporter after China, has so far weathered the crisis relatively well, with low unemployment and dynamic growth.

However, clouds have gathered over the country and output slowed to 0.1 percent in the second quarter, as business and consumer confidence has slumped.

In its monthly report published Tuesday, the economy ministry cautioned that "risks have risen significantly in recent weeks and the mood of investors and consumers has darkened.

"Growth will be slower in the rest of the year due to weaker external impulses and more cautious domestic demand from businesses and private consumers," the report said.

© 2011 AFP

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