FRANKFURT AM MAIN: A revered panel of German economists said Tuesday that slower exports and biting capacity limits had prompted them to lower their growth forecast for the European powerhouse, with a chaotic Brexit a further risk to the outlook.
Output would expand just 0.8 percent this year, said the five-strong “wise men” group — which includes one woman — some 0.7 points lower than their previous forecast, reports AFP.“Significantly weaker export demand from key markets” was one brake on expansion, the experts found, while “capacity constraints and existing labour shortages in many sectors” weighed on the supply side.
“The boom in the German economy has faded,” chairman Christoph Schmidt said, although “given the robust domestic economy, a recession is currently not to be expected.”
The group’s slashed expectations follow similar downgrades from Berlin, international organisations and private think-tanks.
The federal government’s January projections called for 1.0 percent growth, while the International Monetary Fund (IMF) forecast that month was more optimistic at 1.3 percent.
Looking further ahead, the council’s 2020 outlook is much stronger, at 1.7 percent — but the economists highlighted “very high” risks to growth.
“The uncertain outcome of the Brexit negotiations, the unresolved trade conflict between the United States, Europe and China, as well as the danger of a stronger-than-expected slowdown of the Chinese economy” could all deal new blows to the forecast, they said.In particular, “a spiral of protectionist measures would have the potential to slide the German economy into recession,” the experts warned.