German economy to grow by 0.7% in 2013 – research institute

13 December 2012 16:41  [Source: ICIS news]

LONDON (ICIS)--Germany’s economy should grow by 0.7% in 2013 if the eurozone debt crisis does not deepen any further, Munich-based economics research institute Ifo said on Thursday.

Ifo said that “domestic upward forces and rising demand for German export goods from outside the EU should boost the economy” in 2013.

Ifo’s forecast compares with the 0.4% GDP growth projected for next year by Germany’s central bank.

Ifo said that for the current 2012 fourth quarter it expects a 0.3% contraction in Germany’s GDP, mainly because of the eurozone crisis. German production will likely stagnate in the winter months of 2012-2013, it added.

“However, from today’s standpoint Germany does not look set to slip into an outright recession,” the institute said. It also pointed to November's improvement in its business climate index.

As for 2012, after a strong start Germany’s overall economic output lost momentum as uncertainty spurred by the European debt crisis curbed domestic demand, Ifo said.

Out of all segments of domestic demand, investment in equipment and machinery was the most seriously affected, falling sharply over the course of the year despite favourable financing conditions, the institute said.

Investment in buildings also dropped until the middle of the year. This was mainly due to a slump in public sector investment in construction after the subsidies of the economic stimulus packages agreed upon during the last recession expired at the end of 2011.

In residential construction, on the other hand, low interest rates continued to stimulate the market.

Germany’s GDP growth was boosted by international trade, but this has clearly weakened in recent months, the institute said.

Germany’s chemicals production is expected to grow by 1.5% in 2013, after a 3.0% year-on-year decline in 2012, the country’s chemical industry association VCI said earlier this week.

By: Stefan Baumgarten
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