German institutes warn of recession, halve 2013 forecast
BERLIN: Germany's leading economic think tanks warned on Thursday there was a "great danger" that Europe's top economy could fall into recession, as they slashed their growth forecasts for next year in half. The four institutes -- Ifo in Munich, IfW in Kiel, IW in Halle and RWI in Essen -- also lashed out at theEuropean Central Bank, saying its latest anti-crisis measures risked fuelling inflation in the 17 countries that share the euro.
"The euro crisis is negatively impacting economic activity in Germany," the institutes wrote in their joint twice-yearly forecasts, published here on Thursday. "Should the situation in the eurozone continue to deteriorate, this will also impact the German economy. Over the forecasting period as a whole the downside risks prevail and there is a great danger that Germanywill fall into a recession," they warned.
While Germany clocked up growth of 0.5 per cent in the first quarter and 0.3 per cent in the second quarter, "there are currently a large number of signs that overall economic expansion will weaken towards the end of the year," they wrote. As a result, gross domestic product ( GDP) was projected to grow by 0.8 per cent overall this year and by 1.0 per cent next year. That marked a downgrade from the institutes' previous spring forecasts when they had been pencilling in growth of 0.9 per cent for this year and 2.0 per cent for next year.
Furthermore, the latest projections were based on the assumption that the situation in the euro area, currently grappling with its worst-ever crisis, would stabilise. If it did not then Germany, which has held up much better to the long-running crisis than its eurozone partners, could find its economy going backwards, they said.
Chancellor Angela Merkel acknowledged that after two "very good" years of growth, that this year would be "weaker." "If you believe the forecasts -- I cannot be more precise -- we will have maybe 0.8 per cent, 0.9 per cent, around one per cent," Merkel told reporters after meeting Hungarian Prime Minister Viktor Orban.
The German government publishes its twice-yearly forecasts next week.
"The euro crisis is negatively impacting economic activity in Germany," the institutes wrote in their joint twice-yearly forecasts, published here on Thursday. "Should the situation in the eurozone continue to deteriorate, this will also impact the German economy. Over the forecasting period as a whole the downside risks prevail and there is a great danger that Germanywill fall into a recession," they warned.
While Germany clocked up growth of 0.5 per cent in the first quarter and 0.3 per cent in the second quarter, "there are currently a large number of signs that overall economic expansion will weaken towards the end of the year," they wrote. As a result, gross domestic product ( GDP) was projected to grow by 0.8 per cent overall this year and by 1.0 per cent next year. That marked a downgrade from the institutes' previous spring forecasts when they had been pencilling in growth of 0.9 per cent for this year and 2.0 per cent for next year.
Furthermore, the latest projections were based on the assumption that the situation in the euro area, currently grappling with its worst-ever crisis, would stabilise. If it did not then Germany, which has held up much better to the long-running crisis than its eurozone partners, could find its economy going backwards, they said.
Chancellor Angela Merkel acknowledged that after two "very good" years of growth, that this year would be "weaker." "If you believe the forecasts -- I cannot be more precise -- we will have maybe 0.8 per cent, 0.9 per cent, around one per cent," Merkel told reporters after meeting Hungarian Prime Minister Viktor Orban.
The German government publishes its twice-yearly forecasts next week.
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