German institutes see recession, cut growth forecasts for 2019, 2020

Investment Guru India

BERLIN - The German economy will slide into a recession in the current quarter, the Kiel Institute for the World Economy (IfW) said on Wednesday as it slashed its growth forecasts for Europe's biggest economy due to trade disputes and Brexit uncertainty.

The IfW institute said it expected the German economy to shrink by 0.3% quarter-on-quarter in the third quarter after a 0.1% contraction in the previous quarter.

It also cut its 2019 growth forecast for the German economy to 0.4% from 0.6% previously. For 2020, it now sees growth of 1.0% for 2020, down from its earlier estimate of 1.6%. For 2021, the institute predicts an expansion of 1.4%.

"The real problem with (U.S. President) Donald Trump's trade disputes is not the tariffs themselves, but the great uncertainty about what is to come.

Uncertainty is poison for investment decisions," IfW President Gabriel Felbermayr said.

He noted, however, that many emerging countries around the world still had a lot of economic catching up to do.

"This offers very great export opportunities for German mechanical engineers and car manufacturers," he said. "There is therefore no reason to question the export orientation of the German economy."

The RWI economic institute also reduced its growth forecast for the German economy for this year to 0.4% from 0.8% previously. For 2020, it sees 0.9% growth, saying there were increasing signs that the economy was going into a downturn.

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