Germany to shrink 4.8% in '09, exports 18% - IWH institute

17 March 2009 18:00  [Source: ICIS news]

TORONTO (ICIS news)--Germany’s economy is projected to shrink 4.8% in 2009, with exports falling 18%, economic research institute IWH said on Tuesday in one of the worst growth forecasts so far for Europe’s largest economy.

The global recession was hitting Germany’s export-based economy much harder than expected only two months ago, the Halle-based institute said.

So far, the government’s stimulus packages had hardly helped in moderating the sharp decline in production, it said.

In fact, additional stimulus measures may be harmful in that they could undermine trust in the government’s long-term sustainable economic policies, the institute said.

The unemployment rate will hit 8.1% this year and 9.5% in 2010, IWH said.

So far, companies had managed to avoid drastic jobs cuts by resorting to reduced working hours and other short-term measures.

However, in light of the ongoing demand and production weakness, unemployment would inevitably go up this year and in 2010, IWH said.

For 2010, Germany’s economy will shrink 0.2%, with exports up only marginally by 0.1%, IWH said. In 2008, the country's GDP grew 1.3% and exports were up 2.7%.

IWH’s projections for 2009 compare with a 3.7% GDP decline forecast last week by the IfW institute in Kiel and the government’s projection in January of a 2.25% decline this year.

Germany’s chemicals producers group Verband der Chemischen Industrie (VCI) said last week it expected chemical production to decline by 3.5% in 2009, down from its earlier projection of a 1% decline it issued in December.

Excluding the pharmaceuticals sector, underlying German chemicals production is expected to shrink 5-6% in 2009, according to VCI.

In related news on Tuesday, another research institute, Mannheim-based ZEW, reported that German investor confidence rose slightly in March, from February, mainly due to lower interest rates and reduced material costs.

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