The German government cut its forecast for economic expansion this year as the debt crisis dims the outlook for sustaining record exports, leaving domestic demand as the main motor for growth.
Europe?s biggest economy will grow 0.7% in 2012, less than the 1% estimated in October and just above the projected average for the euro-area, the Berlin-based economy ministry said on Wednesday in its annual report. Economic growth, which reached 3% last year, will be weak in the first half before growing faster later in the year, it said.
Demand from China and other Asian countries fuelled an export boom in Germany as weaker growth or economic contraction dogged its euro-area allies. Slowing demand in Europe and other countries buffeted by the debt crisis will cut German export growth to 2% this year, a quarter of 2011?s expansion of 8.2%, the report said.
?Economic growth in Germany is only possible with sustained growth in Europe,? economy minister Philipp Roesler said in a prepared speech text. ?That?s why we must make decisive and credible steps to overcome the euro crisis.? Expectations that Germany?s economy will grow faster from the third quarter depends on taming the crisis, Roesler said.
?Germany is and remains the anchor for stability and growth in Europe,? Roesler added while presenting the forecasts. He said he did not expect Germany to enter recession.
?Due to the difficult environment abroad we expect a temporary dent in growth in the winter half. But we are firmly convinced that the German economy will return to higher growth in the course of the year?.
Germany?s economy unexpectedly contracted by 0.25% in the fourth quarter of last year, raising the spectre of a recession in 2012. While the government said it does not see that happening, economic growth will be sustained mainly by domestic demand in the first half, according to the report.
The unemployment rate will fall this year to 6.8% from 7.1% last year, the report said. Private consumption will grow by 1.2%, the report said.
Branding itself as ?world champion? in exports for many years, Germany will rely on domestic demand for growth in 2012, especially private consumption, the ministry said.
Germany has shown more resilience to troubles elsewhere in the euro zone, after fiscal prudence, steady demand for its high-quality products, and high competitiveness helped it weather a tough global environment.
Robust economic growth enabled it to more than halve its initial planned new borrowing in 2011 and take the moral high ground in urging ailing euro zone peers to save and consolidate, after busting euro zone deficit rules itself in 2010.
But the economy is now feeling the pinch of the debt crisis and many economists expect Germany to have fallen into a mild recession by contracting slightly in the last three months of 2011 and the first quarter of 2012.
