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 percent in 2012, less than the 1 percent estimated in October and just above the projected average for the euro-area, the Berlin-based Economy Ministry said today in its annual report. Economic growth, which reached 3 percent 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 fueled 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 percent this year, a quarter of 2011’s expansion of 8.2 percent, 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’s economy unexpectedly contracted by 0.25 percent in the fourth quarter of last year, raising the specter 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 percent from 7.1 percent last year, the report said. Private consumption will grow by 1.2 percent, it said
