BERLIN (Reuters) – The German government on Tuesday cut its economic growth forecast for this year as Economy Minister Peter Altmaier predicted an economic expansion of around 1.5 to 1.6 percent, below his previous forecast of 1.8 percent.
The German economy, Europe’s largest, has shifted into a lower gear as Britain’s looming departure from the European Union and trade conflicts sparked by U.S. President Donald Trump’s ‘America First’ policies cause business uncertainty.
“Growth somewhat slowed in the past months as it did in many other countries,” Altmaier told members of Germany’s foreign press association in Berlin. “For the year as a whole, we’ll have growth of around 1.5 percent to 1.6 percent.”
But the government expects the economic upswing to continue and enter its 10th year of expansion in 2019, he added.
In April, the German government had predicted economic growth of 2.3 percent for this year. In October, Berlin reduced its growth forecast to 1.8 percent.
Altmaier called the rise of populism the biggest risk in Europe, pointing to violent street protests in France. The minister said that trade tensions were also a threat.
“With concern, we see the trade conflict between the United States and China, and we hope that it will be solved,” Altmaier said. “We also hope that the trade tensions between Europe and the U.S. can also be solved.”
In addition to the trade disputes, German exporters are also struggling with a more general slowdown of foreign demand as the global economy cools.
Due to low borrowing costs, record-high employment and inflation-busting pay hikes, domestic demand has become an important source of expansion in Germany in recent years.
However, private consumption was weak over the summer months, with household spending holding back overall economic growth in the third quarter for the first time since 2013.
(Reporting by Michael Nienaber; Editing by Paul Carrel and Gareth Jones)