Jan. 25 (Bloomberg) -- The German government’s forecast for economic growth this year is too pessimistic because spending by companies will probably offset lower demand from austerity-hit Europe and cooling global trade, the country’s biggest lenders said.
German domestic demand will buoy growth as unemployment levels have fallen and companies make investments they delayed last year, Uwe Froehlich, president of the BVR association of cooperative banks, said today at a conference in Frankfurt.
“We think Germany’s economy will develop more positively in 2013,” Froehlich said. With interest rates at historic lows, “the financing hurdle for most consumers and companies is pretty low.”
Froehlich is the second German banking voice in two days to challenge the economic outlook of Chancellor Angela Merkel’s government. Georg Fahrenschon, president of the DSGV association of savings banks, said yesterday that Germany’s small- and medium-sized companies, the so-called Mittelstand, will drive Europe’s economy this year with growth stronger than some economists predict.
Last year “was better than expected and 2013 will be better than feared,” said Fahrenschon, a former Bavarian finance minister. “We don’t see a bad fourth quarter causing sustained uncertainty.” He didn’t provide an estimate.
The euro area, Germany’s largest export market, fell into recession last year as countries from Greece to Spain cut spending to rein in deficits and weaker growth in the U.S. and China curbed global trade. Even so, German business confidence rose more than economists forecast in January to the highest level since June, the Ifo institute in Munich said today. That’s the third straight month that the gauge has risen.
Merkel’s government forecast on Jan. 16 that Germany’s economic growth will slow to 0.4 percent this year from 0.7 percent in 2012. The European Central Bank predicts the 17-nation euro economy will contract 0.3 percent, with countries such as Spain and Italy in recessions.
The German government’s outlook is “too low,” Froehlich said. The BVR’s economists expect German growth “in the direction of 1 percent,” he said.
Germany’s savings and cooperative banks had a combined balance sheet of 2.16 trillion euros at the end of 2011, matching that of Deutsche Bank AG, Europe’s biggest lender by assets.
“I’m also more optimistic than the government,” Christian Ricken, chief operating officer of Deutsche Bank’s private and business clients unit, said today at the Frankfurt conference. Deutsche Bank has “big plans” in its lending business this year, Ricken said without being more specific.
Europe’s sovereign debt crisis may yet scupper growth in Germany and states must continue their budget consolidation, according to both Froehlich and Fahrenschon.
“No one knows how the debt crisis will develop,” said Froehlich. “That has a decisive effect on trust in the region.”
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