The German economy, which long seemed immune to Europe’s debt crisis, is now being hit by slowing growth, the European Central Bank (ECB), the EU Commission and a panel of top economic experts warned on Wednesday.
“Germany can no longer de-couple itself from its external economic environment,” the expert panel, known as Germany’s “Five Wise Men”, said in their latest twice-yearly report.
They forecast only very sluggish growth of 0.8% for Europe’s biggest economy both this year and next year.
The EU Commission in Brussels agreed, similarly cutting both its 2012 and 2013 forecasts for Germany to 0.8%.
ECB president Mario Draghi also said Germany’s economic resilience is finally beginning to fade.
“Germany has so far been largely insulated from some of the difficulties elsewhere in the euro area. But the latest data suggest that these developments are now starting to affect the German economy,” he told a banking conference here.
But growth should start picking up again during the course of next year, according to the Five Wise Men panel, who advise the government on economic matters. Unlike most of its European neighbours, Germany has been spared the worst of the long-running debt crisis thanks to deep and painful structural reforms implemented a number of years ago. It clocked up growth of as much as 4.2% in 2010 and 3.0% in 2011. The German economy is highly dependent on exports and had so far proved to be highly efficient at maintaining momentum despite downturn in many of its markets, notably in the European Union.
But growth has been slowing this year. After expanding by 0.5% in the first quarter, the economy grew by 0.3% in the second quarter and growth looks set to slow again in the third quarter. “Economic momentum in Germany is likely to reach bottom in the fourth quarter,” the Five Wise Men wrote.
“The growth rate will gradually pick up again during the course of 2013. And growth will reach an annual average of 0.8% again next year,” the experts calculated. AFP