IMF cuts Germany growth forecast in half

Uncertainty in the euro zone is hitting Germany, the IMF said yesterday as it halved the projected growth rate for Europe’s largest economy this year.

In its annual report on the German economy, the IMF said Germany should avoid “overperforming” on fiscal consolidation as economic weakness continued.

It said it expected only a weak rebound given continued subdued business investment.
“Amid still elevated euro area uncertainty, we now project GDP in Germany to expand at around 0.3 per cent in 2013,” the IMF said in the findings of a regular mission. In April, the IMF still forecast economic growth this year of 0.6 per cent. Germany’s economy ministry forecasts growth of 0.5 per cent.

The announcement came just hours after European Central Bank president Mario Draghi said the euro zone economy was on track for a recovery later this year.
IMF mission chief to Germany Subir Lall said the fund may also cut its 2014 forecast from a current 1.5 per cent, given lower growth this year.

“A gradual pick-up in activity projected towards the end of the year is conditional on a further and tangible reduction in this uncertainty and an expected gradual recovery in the rest of the euro zone,” the IMF said in a statement.

In a speech prepared for the International Monetary Conference in Shanghai, Mr Draghi conceded: “The economic situation in the euro area remains challenging.”


/AzerTAc/