Ifo Cuts German Growth Forecast, Says Nation to Avoid Recession

The Munich-based Ifo institute slashed its 2012 economic growth forecast for Germany, saying Europe’s largest economy can avoid a recession unless the euro region’s debt crisis worsens.

Ifo cut its 2012 growth forecast to 0.4 percent from 2.3 percent today and lowered its outlook for this year to 3 percent from 3.3 percent. While hiring will slow in 2012, unemployment will still decline as the population shrinks, it said.

“The global economic development in the forecasting period depends decisively on the ability to manage the European debt crisis,” Ifo said in an e-mailed statement. The forecast “rests on the assumption that it’s possible to calm financial markets lastingly and thus prevent a further escalation of the crisis.”

While the debt crisis is threatening to tip the 17-nation euro region into recession, Germany is showing few signs of slowdown. Industrial production rose more than economists forecast in October, manufacturing orders rebounded and unemployment declined in November, pushing the jobless rate to a seasonally adjusted 6.9 percent.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net