German industry downgrades growth forecast

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The German BDI industry federation downgraded Thursday its growth forecast for the current year as the outlook for Europe's biggest economy continues to cloud over.

BDI chief Markus Kerber said the federation is now pencilling in growth of 1.2-1.4 percent for the current year, after already cutting the forecast in September.

"The economic outlook has darkened somewhat," but Germany would not slip into recession, Kerber said.

BDI had already revised downwards its growth forecast for 2014 from 2.0 percent to 1.5 percent in September to take into account the economic fallout from the different geopolitical crises around the world which was weighing on investment.

"The German economy is suffering above all from weak investment," Kerber said, pointing to high unemployment and weak growth across the entire eurozone and the crises in the Middle East and Ukraine.

The BDI chief argued that exports to other countries were making up for the effects of economic sanctions against Russia, but he warned of possible disruptions to Europe's oil and gas supply if the Ukraine crisis escalates further.

"Low interest rates and favourable investment conditions are not in themselves a guarantee for increased investment in Germany," Kerber said, referring to the very accommodative monetary policy by the European Central Bank.

© 2014 AFP

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