–Adds Bundesbank’s Assessment To Story Sent 11:52 GMT

BERLIN (MNI) – The German government has cut its GDP growth
forecast for this year to 0.7% from the 1.0% figure projected in
October, Economics Minister Philipp Roesler said Wednesday, presenting
the government’s new annual economic report.

In a first forecast for 2013, the government projects GDP growth to
accelerate again to 1.6%.

Due to a difficult foreign economic environment, the German economy
will experience “a temporary growth dent” over the coming months,
Roesler said. “In the course of 2012, the economy will gradually pick up
again,” he predicted.

Bundesbank president Jens Weidmann, who attended the government
cabinet meeting this morning, said he sees the economy moving sideways,
a government spokesman said at a separate press conference here.

Roesler said the government expects German to grow by a modest 0.1%
q/q in the first quarter of this year after -0.3% in the fourth quarter
of last year.

The minister cautioned that the growth expectations hinge on the
assumption that the Eurozone debt crisis won’t deteriorate. “The biggest
risks are developments in financial markets and in the Eurozone,” he

Still, the government sees no risk of a credit crunch in Germany,
Roesler stressed.

Economic growth this year will be mainly supported by domestic
demand, while foreign trade will be a drag on GDP growth, the minister
pointed out.

Private consumption is forecast to grow by 1.2% this year,
equipment investments by 2.0% and construction investments by 0.8%.
Exports are seen increasing by 2.0% and imports by 3.0% in 2012, the
government projects in its annual economic report.

The average unemployment rate is forecast to fall to 6.8% this year
from 7.1% last year. Nominal gross wages per worker are expected to rise
by 2.4% in 2012, while annual average inflation is tabled at 1.8%.

The downwardly revised 2012 GDP growth forecast will not prompt a
revision of the 2012 budget numbers, Roesler said.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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