Bundesbank cuts growth outlook as crisis bites

Fri Dec 7, 2012 1:01pm IST

FRANKFURT Dec 7 (Reuters) - Germany's Bundesbank cut its growth outlook for next year on Friday as the euro zone debt crisis takes its toll on the bloc's largest economy, but added that the country would return to its growth path soon.

The move comes a day after the European Central Bank cut its growth forecasts for next year pointing to weaker growth prospects for the bloc's core countries, such as Germany, France and the Netherlands.

Germany has been a key growth driver of the euro zone, now in its second recession since 2009, but the country's resilience to the crisis is wearing thin, and the central bank's new projections reflect this.

"Given the difficult economic situation in some euro-area countries and widespread uncertainty, economic growth will be lower than previously assumed," the Bundesbank said.

"The Bundesbank does not see a protracted slowdown but instead anticipates a return to growth path soon."

Industrial orders and output in Germany have dropped in recent months, with exports falling at their fastest pace since late last year. Economists expect the German economy to contract in the fourth quarter but to improve as soon as in the first quarter.

The Bundesbank said there was a chance of Germany entering a recession - defined as two consecutive quarters of negative growth.

"There are even indications that economic activity may fall in the final quarter of 2012 and the first quarter of 2013," it said.

The Bundesbank now expects Germany's economy to grow 0.7 percent this year, down from an earlier forecast of 1.0 percent, and 0.4 percent next year, down from a June forecast of 1.6 percent.

However, it put the 2014 growth forecast at a healthy 1.9 percent.

The Bundesbank sees inflation above 2 percent this year and falling to 1.5 percent next year, having earlier expected inflation of 2.1 percent this year and 1.6 percent in 2013. In its first take on 2014 inflation, it estimated prices to rise 1.6 percent that year.

(Reporting By Eva Kuehnen and Sakari Suoninen)

((eva.kuehnen@thomsonreuters.com)(49 69 75651244)(Reuters Messaging: eva.kuehnen.thomsonreuters.com@reuters.net)) Keywords: BUNDESBANK/ECONOMY

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