Germany likely to slip into short recession – DIW institute

04 January 2012 17:45  [Source: ICIS news]

LONDON (ICIS)--Germany will likely slip into a short-term recession in the first half of 2012, as companies are curbing investments amid weakness in the global economy, unfavourable sale prospects and uncertainties in the eurozone, an economics research group said on Wednesday.

“Germany’s export-dependent economy cannot escape impacts from a weaker world economy,” DIW Berlin said in a report.

However, the Berlin-based institute said that in the second half of 2012, Germany’s economy would recover because of rising exports and stronger domestic demand.

For the full 12 months of 2012, DIW expects GDP in Europe’s largest economy to grow by 0.6% year on year, compared with the 3.0% growth seen in 2011.

For 2013, DIW forecasts GDP growth of 2.2% in Germany.

But the institute warned that its projections assume that EU leaders will manage to find a convincing solution to the eurozone sovereign debt crisis in coming months.

Failing such a solution, it said Germany could see a “perceptible recession” this year, with rising unemployment and decreasing demand.

DIW said the decisions taken by EU leaders so far to resolve the crisis could bring longer-term stability within the eurozone, but offered little to address near-term challenges and dangers to the economy.

“The uncertainties are already hurting the economy and business relations between banks,” said DIW economist Ferdinand Fichtner.

EU leaders should not unduly delay their reform efforts or “we may suddenly be in the same situation we were in after the Lehman bank collapse [in 2008]”, he added.

In Germany’s chemical industry, producers trade group VCI has forecast a 1.0% year-on-year increase in chemical production for 2012. This compares with 4.0% year-on-year growth expected for 2011.

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy blog

By: Stefan Baumgarten
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