Germany cuts 2009 GNP growth forecast to 0.2%

16 October 2008 19:42  [Source: ICIS news]

TORONTO (ICIS news)--Germany on Thursday reduced its 2009 GNP growth forecast to 0.2%, from earlier 1.2%, amid fears that Europe’s largest economy is on the brink of a recession due to the global financial crisis and weak export demand.

 

Germany’s economy was being severely tested as impacts from the financial and credit crisis were spilling over into the real economy, economics minister Michael Glos said.

 

He broadly echoed recent warnings by leading research institutes and industry groups, including chemicals producers, which cut back on their projections for the country's economy.

 

Unlike in past years, Germany could not rely on export demand to drive its growth in 2009 due to weaker global economies, Glos said.

 

While declining oil prices could support domestic demand, the government needed to look at additional ways to relieve consumers, Glos said. As one measure, he called for more allowable deductions from taxable income.

 

Also, in the current economic climate, it was not appropriate to burden Germany’s auto manufacturers with exaggerated European carbon dioxide (CO2) targets, he said.

 

The ministry’s 2009 forecast assumed that the government’s €500bn ($676bn) aid package from Monday to help banks would prevent further deteriorations in the financial and banking system, Glos said.

 

For the full 12 months of 2008, growth was expected at 1.7%, down from 2.5% in 2007 and 3.0% in 2006, according to the ministry's forecasts.

 

($1 = €0.74)

 

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By: Stefan Baumgarten
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