German Government slashes economic growth forecast

| October 20, 2011
”German

The German Government has today slashed its growth forecasts for the euro zone’s largest economy.

The Government said it now expected the economy to expand by 1% in 2012, down from an earlier estimate of 1.8%.

Meanwhile, this year’s forecast has been lowered slightly to 2.9% from 3%.

Its downgrade comes just a week after Germany’s leading economic institutes cut their growth forecasts for the economy from 2% next year to 0.8%, citing the debt problems in the euro zone.

Both sets of figures will raise questions about the recovery in the euro zone as slow growth in Germany makes it more difficult for the rest of the region to avoid a double dip recession.

Last year, Germany posted growth of 3.6% – the strongest pace since reunification in 1990, according to the Federal Statistical Office.

However, a recent slew of weak economic data has forced many to re-evaluate their assessment of the economy.

The Washington-based International Monetary Fund recently lowered its growth forecasts for both Germany and the euro zone this year and next, as a result of the debt crisis.

Returning to the Government’s forecast, it said its revision was due to the expectation that demand for exports will be lower.

Economy Minister Philipp Roesler, comments: “The pace of expansion has slowed down, as we expected,” adding however that “our economy remains on a growth path.”

Meanwhile, German unemployment will continue to fall next year, with the unemployment rate falling to 6.7% from 7% in 2011, according to the Government.

Last month, official data revealed unemployment in Germany dropped to its lowest level in more than 20 years in September.

The country’s unemployment rate fell from August’s rate of 7% to 6.6% and its job market has performed much better than in many other countries and many believe it is the result of the “Kurzarbeit” scheme, introduced by the Government, designed to prevent mass redundancies.

Last year, Germany’s unemployment rate plunged to 7.7% from 8.2% in 2009 as a result of the Government initiative.

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