German Growth Forecast Cut by Institutes on Euro-Area Crisis

German economic institutes that advise the government pared their outlooks for Europe’s biggest economy, citing the impact of the euro-region debt crisis.

Growth will slow to 0.8 percent this year before rebounding to 1.1 percent next year after 3 percent in 2011, the Kiel-based Institute for the World Economy said. The Halle, eastern Germany-based IWH institute, in a joint forecast with Kiel Economics, predicted the expansion will cool to 0.9 percent this year and 0.8 percent in 2013.

“The German economy can’t escape the damping impetus from beyond its borders,” the Institute for the World Economy said today in a report. A lack of confidence in governments’ ability to solve the crisis is hurting corporate investment and the outlook for foreign sales is bleak, it said.

German growth slowed in the second quarter and business confidence has dropped for four straight months as the crisis dents demand for German goods in other euro-area countries. The expansion may accelerate in the third quarter before stalling in the final three months, the IWH-led group said.

“In the autumn of 2012, the situation and the outlook for the German economy present themselves much worse than half a year ago,” the group said in an emailed statement. A crisis of debt and confidence in the euro region “clouds sentiment and expectations further.”

The IfW said in June the economy would expand 0.9 percent in 2012 and 1.7 percent in 2013. The IWH-led group in April said German gross domestic product will grow 0.9 percent this year and 2 percent next year.

Even so, Germany’s overall fiscal position will be close to balance this year and next after posting a deficit of 0.8 percent of GDP in 2011, all institutes said.

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

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