Germany reaffirms 0.7 pct 2012 growth forecast

[April 25, 2012]  BERLIN (AP) -- Germany's government reaffirmed its growth forecast of 0.7 percent this year despite the turmoil of the European debt crisis, adding that their country's economy would run ahead of its 16 partners in the eurozone.

Economy Minister Philip Roesler said Wednesday the government expects the economy to pick up more strongly later this year amid steady exports and robust domestic demand. Gross domestic product is forecast to grow by 1.6 percent in 2013.

Roesler says the forecast errs on the side of caution and Germany will grow above the continent's average, "continuing to be a locomotive of growth for Europe."

He says Germany, the 27-nation bloc's biggest economy, will see rising wages and lower unemployment this and next year and that "Germany is doing well."

Indicators of economic sentiment such as the Ifo institute survey of business executives and the ZEW poll of investment professionals suggest that Germany's economy is on an upward curve after a slow patch over the winter. The economy shrank by 0.2 percent in the fourth quarter but economists increasingly think growth may have returned in the first quarter and will pick up more strongly during the rest of the year. Low unemployment that encourages consumer spending and strong exports to emerging markets and a recovering US economy get much of the credit.

That upbeat outlook is increasingly in contrast with the rest of the 17-country eurozone. The European Union's executive commission predicts eurozone economic output will shrink by 0.3 percent this year.

Italy and Spain, the No. 3 and No. 4 economies in the currency, are seeing their economies sag as they make cuts in government spending to reduce their deficits. Governments all over Europe are cutting back spending to keep debt levels under control and keep bond investors willing to lend them money to roll over their debts at an affordable cost in interest. Greece, Ireland and Portugal have received bailout loans from the other countries and have been put on enforced diets of austerity in return for getting the money.

Germany's leading economic institutes said last week they expect GDP to grow 0.9 percent this year and a more robust 2 percent in 2013.

[Associated Press]

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