BERLIN — Germany’s economy is on track to recover gradually from the financial crisis, despite stagnating growth this winter, a group of leading institutes said Thursday.
The report, prepared by a group of leading German economic think tanks, forecast that Germany’s economy will grow 1.5% in 2010 and 1.4% in 2011, led by recovery in Germany’s broad export sector. Driven by growth in Asian and South American markets in particular, the institutes projected German exports to grow 7.1% in 2010 and 6.3% in 2011.
“After the deep slump caused by the financial crisis, the economy’s basic trend is pointing upward,” the institutes said in their semiannual report.
Stagnation at the end of 2009 and early this year were caused by an unusually harsh winter and the end to a government cash-for-clunkers scheme that had boosted car sales, the institutes said.
The new forecast improves on their previous prediction of 1.2% growth in 2010, made last October. Germany’s economy is recovering from a record-setting 5% retraction in 2009, and the government’s own forecast is currently for 1.4% growth in 2010.
The institutes’ report will set the tone for an updated government forecast to be released April 21.
Economics Minister Rainer Bruederle said Thursday that the institutes’ forecast was roughly in line with that of the German government.
“The growth path must be increased,” Mr. Bruederle said.
While Europe’s largest economy and conditions in Europe more broadly are improving, the effects of the crisis linger. Therefore, the European Central Bank is likely to continue to maintain the low interest rates intended to encourage growth for now, even as it starts withdrawing some of the other monetary policies it enacted to fight the crisis.
“The ECB will maintain its expansive interest policy, the institutes’ estimate, and will now confine themselves to withdrawing the extraordinary measures to supply liquidity,” the report said.
Despite the lingering effects of the crisis the German job market is stable, the institutes said. They predicted that unemployment will be 7.8% in 2010 and 7.6% in 2011.
The jobless rate was 8.0% in March this year, down from 8.1% in February in adjusted terms, according to the Federal Labor Agency.
“Since the beginning of the recession, the job market has proven to be astonishingly robust,” the institutes said.
The think tanks said the German government’s budget deficit would be 4.9% of gross domestic product in 2010 and 4.2% in 2011.
The report is compiled by four groups of think tanks: one is Munich’s Ifo Institut fuer Wirtschaftsforschung e.V., together with the economic research department of Zurich’s university Eidgenoessische Technische Hochschule; another is the Kiel-based IfW Institut fuer Weltwirtschaft. A third group is the IWH Institut fuer Wirtschaftsforschung in Halle together with Duesseldorf’s Institut fuer Makrooekonomie und Konjunkturforschung and the Oesterreichisches Institut fuer Wirtschaftsforschung in Vienna. Finally, the RWI Rheinisch Westfaelisches Institut fuer Wirtschaftsforschung in Essen and the Institut fuer Hoehere Studien in Vienna contribute to the report.
By PATRICK MCGROARTY
Tags: economy, european central bank, financial, financial crisis, germany, Global Economy, inflation, monetary, recession
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