BERLIN (MNI) – The economic panel of the German Banking Association
(BDB), consisting of the chief economists of the main private banks in
Germany, on Wednesday forecast German GDP to grow by 0.9% this year and
by 1.1% next year.
“The European sovereign debt crisis is currently dampening the
German economy,” BDB board member Hans-Joachim Massenberg said. “The
economic outlook for the German economy for the second half of 2012 is
anything but friendly.”
Due to the expected weak second half year, the economists don’t see
a positive statistical overhang for the economy next year.
Currently, many businesses are holding back on investments,
Massenberg remarked. “As soon as the negative effects of the debt crisis
will be fading, this blockade will end,” he predicted, though.
Equipment investments are forecast by the economic panel to
contract by 2.2% this year and to grow by 1.0% next year. Construction
investment is seen expanding by 0.1% in 2012 and by 1.7% in 2013.
Private consumption is expected to increase by 0.9% this year and
by 1.3% next year. Government consumption is tabled at +1.1% in 2012 and
+0.8% in 2013.
Annual average unemployment is forecast at 2.885 million this year
and 2.907 million next year. The country’s public deficit is tabled at
0.4% of GDP in 2012 and 0.5% in 2013.
The joint forecasts are based on the assumption that the debt
crisis will ease somewhat over the coming months and next year,
Massenberg explained.
The economists have “mixed feelings” towards the European Central
Bank’s new bond-buying program, the OMT, the BDB board member said. “A
sustainable relaxation [of the crisis] will only occur if the Eurozone
member states determinedly continue their reform path,” he reasoned.
The state of the global economy will remain “very fragile” for the
time being, the bank economists remark in their joint report.
They don’t expect the recession in the Eurozone to end already this
year. “Due to the continued consolidation measures and the still
unsolved structural problems, a recovery process will only begin very
slowly and moderately,” the panel predicts.
The economists forecast a contraction of Eurozone GDP of 0.5% this
year and moderate growth of 0.3% next year. Eurozone inflation is seen
at 2.4% in 2012 and 1.9 in 2013. German inflation is expected at 2.0%
this year and 1.9% next year. The ECB’s definition of price stability is
inflation of below but close to 2%.
Due to the difficult economic situation and the modest outlook, the
economists expect the ECB to cut rates this year again by another 25
basis points to 0.5%. “The majority of chief economists expects that the
current rate cutting cycle will be ended” at that level, the report
states. The panel expects the ECB to keep rates unchanged next year.
The economists believe that the euro’s foreign exchange rate will
remain volatile “in a difficult economic and political environment.”
They forecast an euro foreign exchange rate of $1.23 at the end of this
year and of $1.22 at the end of next year. A range of between $1.20 to
$1.30 is a fair valuation for the euro, they said.
–Berlin bureau: +49-30-22620580; email: twidder@marketnews.com
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