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Germany's economy to grow 0.2%, says adviser

By EARLE GALE in London | China Daily Global | Updated: 2024-02-22 09:41
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Steam rises from the cooling towers of a power plant in Niederaussem, in western Germany. [INA FASSBENDER/AFP]

Germany is likely to see disappointing economic growth of about 0.2 percent this year, instead of the slightly better 0.7 percent predicted by government advisers in November.

The revision of the growth forecast by the government's council of advisers will be detailed in its next update in mid-May, but it is likely to be in line with other estimates for this year's economic growth of 0.2 percent, adviser Ulrike Malmendier told Reuters.

"I think we will definitely be going in the same direction... that is what our numbers are indicating," Malmendier said.

The federal government initially said in its own projections that economic growth for this year would be about 1.3 percent, but it also revised that down, to about 0.2 percent, after unexpectedly poor growth in the global economy and following a ruling from a German constitutional court that affects the amount of money available for government borrowing.

The German economy had been dented by a "perfect storm "of impediments, including weak exports, expensive energy and problems with the transition to a green economy, Agence France-Presse commented on Wednesday. The economic woes had triggered "bickering" among members of Chancellor Olaf Scholz's three-party coalition, it said.

Germany, which is Europe's largest economy, ended 2023 in recession, after economic growth shrank by 0.3 percent in the final quarter. AFP said the latest data suggested the first quarter of this year will see another contraction.

Economy Minister Robert Habeck said recently that the situation was "dramatically bad", with the country's industrial sector struggling to cope with high energy prices triggered by the Russia-Ukraine conflict. Resulting price rises for commodities fueled sharp rises in inflation, which caused the European Central Bank to repeatedly raise interest rates, which in turn dried up spending, dampened demand and damaged investments.

Major German companies, including chemical giants BASF and Bayer, were among about 60 enterprises that recently called on the European Union to do more to help, and to come up with a "European industrial deal" to support the bloc's businesses in competing with rivals.

"Without a targeted industrial policy, Europe risks becoming dependent even on basic goods and chemicals. Europe cannot afford this to happen," the companies said in a joint statement.

German Finance Minister Christian Lindner said the country must help get the economy moving again by easing the tax burden on corporations and cutting regulations.

"If we do nothing, Germany will become poorer," he told the BBC.

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