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14-10-2014, 10:39 PM
Germany slashes growth forecasts
DOW JONES NEWSWIRES WITH AMBER PLUM OCTOBER 15, 2014 12:00AM
Germany slashed its growth forecasts for this year and next, citing a weak global economy amid a series of international crises, in a step that follows a slew of poor data for Europe's biggest economy.
The economics ministry cut its forecast for economic growth this year to 1.2 per cent from an earlier forecast of 1.8 per cent, and to 1.3 per cent for 2015 from 2 per cent previously.
"The German economy is in choppy waters concerning foreign trade," Sigmar Gabriel, minister for economics and energy, said in a statement.
The cut for 2014 was broadly expected after the economics minister warned in a radio interview in late September that growth could come in below the earlier 1.8 per cent forecast, given the tensions between Russia and Ukraine. In Tuesday's statement, the ministry said achieving better growth next year will depend on international factors improving, but added that Germany's robust jobs market and domestic demand remain intact.
The government's latest forecast comes after the closely watched ZEW survey on Tuesday showed a sharp drop in economic sentiment and follows several weak German data releases, notably August's steepest on-the-month fall in exports since the 2009 recession.
ZEW President Clemens Fuest said he couldn't rule out an economic contraction in the third quarter.
"We are getting close," Mr Fuest said at a news conference following the release of the survey data, however he noted any recession would likely be short-lived given Germany's strong domestic fundamentals.
A sharp drop in the German ZEW economic-sentiment survey of financial analysts measuring sentiment slumped into negative territory, to minus 3.6, considerably weaker than the average forecast of 0.8 in a poll by the The Wall Street Journal, after September's 6.9 figure.
Sentiment on current conditions in the ZEW survey also tumbled more than 22 points to a reading of 3.2, compared with a reading of 25.4 in September.
Mr Gabriel, leader of the left-leaning Social Democrats, the junior partner in German Chancellor Angela Merkel's coalition, said Germany needs to invest "considerably more in its infrastructure" to generate growth.
Germany's leading economic think tanks last week also slashed their growth forecasts on the domestic economy for 2014 and 2015, citing weak demand at home and abroad, and a frail eurozone. The institutes said that Europe's largest economy will grow by only 1.3 per cent this year and 1.2 per cent next year, compared with April's forecasts of 1.9 per cent and 2.0 per cent, respectively.
Among a number of weak German data releases, August's export data showed the steepest on-the-month fall in exports since the 2009 recession. It was flanked by tepid figures on industrial output and manufacturing orders.
Last week, the International Monetary Fund revised its view of the eurozone, raising the likelihood of recession to nearly 40 per cent from just over 20 per cent in April. Last week, German economic institutes chopped their consensus growth forecast for this year to 1.3 per cent from a 1.9 per cent forecast in the spring.
DOW JONES NEWSWIRES WITH AMBER PLUM OCTOBER 15, 2014 12:00AM
Germany slashed its growth forecasts for this year and next, citing a weak global economy amid a series of international crises, in a step that follows a slew of poor data for Europe's biggest economy.
The economics ministry cut its forecast for economic growth this year to 1.2 per cent from an earlier forecast of 1.8 per cent, and to 1.3 per cent for 2015 from 2 per cent previously.
"The German economy is in choppy waters concerning foreign trade," Sigmar Gabriel, minister for economics and energy, said in a statement.
The cut for 2014 was broadly expected after the economics minister warned in a radio interview in late September that growth could come in below the earlier 1.8 per cent forecast, given the tensions between Russia and Ukraine. In Tuesday's statement, the ministry said achieving better growth next year will depend on international factors improving, but added that Germany's robust jobs market and domestic demand remain intact.
The government's latest forecast comes after the closely watched ZEW survey on Tuesday showed a sharp drop in economic sentiment and follows several weak German data releases, notably August's steepest on-the-month fall in exports since the 2009 recession.
ZEW President Clemens Fuest said he couldn't rule out an economic contraction in the third quarter.
"We are getting close," Mr Fuest said at a news conference following the release of the survey data, however he noted any recession would likely be short-lived given Germany's strong domestic fundamentals.
A sharp drop in the German ZEW economic-sentiment survey of financial analysts measuring sentiment slumped into negative territory, to minus 3.6, considerably weaker than the average forecast of 0.8 in a poll by the The Wall Street Journal, after September's 6.9 figure.
Sentiment on current conditions in the ZEW survey also tumbled more than 22 points to a reading of 3.2, compared with a reading of 25.4 in September.
Mr Gabriel, leader of the left-leaning Social Democrats, the junior partner in German Chancellor Angela Merkel's coalition, said Germany needs to invest "considerably more in its infrastructure" to generate growth.
Germany's leading economic think tanks last week also slashed their growth forecasts on the domestic economy for 2014 and 2015, citing weak demand at home and abroad, and a frail eurozone. The institutes said that Europe's largest economy will grow by only 1.3 per cent this year and 1.2 per cent next year, compared with April's forecasts of 1.9 per cent and 2.0 per cent, respectively.
Among a number of weak German data releases, August's export data showed the steepest on-the-month fall in exports since the 2009 recession. It was flanked by tepid figures on industrial output and manufacturing orders.
Last week, the International Monetary Fund revised its view of the eurozone, raising the likelihood of recession to nearly 40 per cent from just over 20 per cent in April. Last week, German economic institutes chopped their consensus growth forecast for this year to 1.3 per cent from a 1.9 per cent forecast in the spring.