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Berlin cuts growth forecast for 2005

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Berlin cuts growth forecast for 2005
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Economic growth in Germany, Europe’s largest economy, has probably peaked, according to the latest prediction from the German goverment.

It has again lowered its forecast for growth this year, based on the belief that the pace of exports will slow down. It is exports that have been keeping the economy bouyant. This is the third time in nine months that Berlin has trimmed its expectations for the economy. Its last forecast, in October, was for 1.7% growth, the same as last year. Now it says it will likely reach just 1.6%. That is still more optimistic than the estimates by the International Monetary Fund, which thinks 1.5% and the Organisation for Economic Co-operation and Development which has gone for 1.4%. However, Economy and Labour Minister Wolfgang Clement said the recovery remains intact and will strengthen as domestic demand picks up. He predicts the German household spending will rise this year. Meanwhile, a closely watched report from the private Ifo institute showed business sentiment in Germany improving. IFO surveys around 7,000 companies for their assessment of the current business climate and their expectations for the near future. This time around the index rose to its highest level since February last year. It had already shown a sharp increase in December. The Ifo survey also showed that companies’ expectations for the next six months improved and hit their highest level since last June.