Germany Slashes Its Own 2013 GDP Outlook -- Full Euro Downgrade Next?

Banking, finance, and taxes

Published: March 25, 2013 12:05 pm

Last Updated: March 25, 2013 12:07 pm

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The German Council of Economic Experts has lowered its economic forecast for Germany for the year 2013. The good news is that this remains positive on the growth front. The bad news is that the growth is now expected to be so small that no one will be excited about it.

Monday’s adjusted forecast is that gross domestic product (GDP) will grow by 0.3 % in 2013. The council’s prior forecast was a full half-point higher at 0.8% in prior projections. We would also point out that, if Germany’s growth is going to be that much weaker, and if Germany is the dominant country in the European Union, then this is a really not just a downgrade of Germany’s 2013 expected GDP. This effectively is a downgrade of all of Europe’s GDP growth in 2013.

Will anyone discount the downgrade since the prior forecast was made in November of 2012? Possibly, but that is a substantial downgrade. Again, it is now so low that we would put this downgrade as going from “almost tolerable growth” to “negligible growth.” The drop in the fourth quarter of 2012 was cited, but we would point out that this is a forecast for 2013 rather than making excuses for the end of 2012.

The report said:

The sources of economic growth are expected to be predominantly domestic. Especially Household Final Consumption Expenditure should continue to display a robust development, given that the labor market is still remarkably stable. Investment will most likely not provide a significant contribution to growth, though, at least in the first half of 2013. Overall, the growth contribution of net exports is expected to be negative in 2013.

Employment in 2013 is expected to grow by 0.3% by headcount, compared to 2012. The average is now forecast to be 41.7 million people in 2013. Unfortunately, the stated unemployment rate in Germany is expected to be rise by 0.1 percentage points to a yearly average of 6.9% in 2013.

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