Germany will skip recession, double growth next year
2012-04-26 17:37:37
Germany will dodge recession in 2012 despite the eurozone debt crisis and should double its growth rate next year, the government said Wednesday, unveiling new forecasts for Europe's top economy.
Europe's powerhouse will grow by 0.7 per cent in 2012 and by 1.6 per cent next year, Economy Minister Philipp Roesler told reporters, sticking to Berlin's previous forecast made in January.
"Growth of 0.7 per cent, higher income and more people in employment show that Germany is doing well ... Germany is and remains the growth motor in Europe," Roesler said.
Unemployment is expected to drop to 6.7 per cent this year and to a new record low of 6.5 per cent in 2013, the government said.
Germany has defied the eurozone debt crisis and generally performed better than its trading partners in Europe.
Data published earlier on Wednesday showed that Britain's economy unexpectedly sank back into recession in the first quarter of the year, contracting by 0.2 per cent.
However, Roesler warned that the German forecasts were "on the cautious side."
"The risks from the international environment remain high. The European sovereign debt crisis has not been solved," he said.
Another risk was that higher oil prices could erode purchasing power, Roesler said.
However, while Germany remains the world's second top exporter after China, Roesler said that the recovery was being driven primarily by domestic demand.
And he stressed Germany's line that austerity measures were the best way to secure a solid economy, as a debate rages in Europe about shifting the crisis-fighting strategy to fostering growth rather than tightening belts.
"The positive trend in Germany shows that (budgetary) consolidation and courageous structural reforms pay off on the labour market. That is an important message to our partners in Europe," said Roesler.
After suffering more than most in the economic crisis following the 2008 collapse of US investment bank Lehman Brothers, Germany has proved resilient to the debt turmoil that has crippled many eurozone partners.
The most closely watched indicator of Germany's health, the business confidence survey conducted by the Ifo institute, has risen for the past six months in a row, confounding analysts who keep expecting a softening.
And amid turbulence in the debt markets, investors have flocked to lend money to Germany, seen as a safe haven during the storm.
The German government auctioned a 30-year bond earlier on Wednesday at a record low yield but with investors bidding for less than the total amount on offer.