Growth crawl
January 18, 2012
Germany will grow by a meager 0.7 percent this year, Economics Minister Philipp Rösler told reporters in Berlin on Wednesday, as he reversed the German government's October growth prediction of 1.0 percent for this year.
Despite the slow in economic expansion, Rösler insisted that, "there can be no talk of a recession."
"Germany is and remains an anchor for stability and growth in Europe," the minister said, as he presented the twice-yearly government forecasts.
Rösler said he was convinced that Germany would find its way back to "strong growth," adding that he expected a rebound that would garner around 1.6 percent growth in 2013.
Temporary dip
The German economy suffered badly during the 2008 global financial crisis, registering its worst recession in six decades. But due to multi-billion-euro growth packages ploughed into the economy and a scheme allowing workers to reduce their hours while keeping their jobs, Chancellor Angela Merkel managed to keep a lid on unemployment and growth rebounded strongly.
After shrinking by around 5.0 percent in 2009, Germany marked record growth of 3.7 percent in 2010 and continued to grow at a decent clip of 3.0 percent last year.
Economics Minister Rösler said that he still saw the German economy in "robust form," after growing "extraordinarily" for two years.
"But due to a difficult external environment, we are expecting a temporary dip in growth in the first half of the year," he said.
Looming risks
The German government based its projections on the assumption of a relaxation in market tension and a rapid solution to the eurozone debt crisis.
The "main risk" for growth in 2012 was "without doubt a worsening of the crisis in Europe," Rösler said.
Other risks that might affect the German economy were recessions in major industrialized countries, and a sharp slowdown of growth in emerging markets like China, Brazil and India. This would hit German exports hard.
Robust domestic demand
After years of criticism that Germany was over-reliant on exports, there are signs that the economy is becoming more balanced.
Rösler said the growth dynamic in 2012 would come exclusively from domestic demand, adding that "private consumption would support the German economy significantly."
"This will strengthen the resistance of the German economy from outside influences," he said.
Although unemployment is already near record lows, the government expects the economy to continue creating new jobs, with 220,000 new positions likely this year.
The government's outlook is supported by forward-looking data on German investor confidence published by the ZEW economic think tank Tuesday. The Mannheim-based economic research institute said its indicator of economic sentiment for Germany increased by 32.2 points, the highest level since July 2011, when nagging worries about debt welled up.
Author: Uwe Hessler (dpa, AFP)
Editor: Nancy Isenson