Germany to halve 2019 growth forecast - government source

Credit: Reuters Studio
Published on April 12, 2019 - Duration: 01:54s

Germany to halve 2019 growth forecast - government source

The German government is set to halve its 2019 growth forecast for Europe's biggest economy, a government source told Reuters on Friday, reflecting a worsening slowdown led by a recession in the manufacturing sector.

David Pollard reports.


Germany to halve 2019 growth forecast - government source

Europe's powerhouse Germany could be weakening faster than even its government thought.

In January, it downgraded its growth outlook to one per cent for this year.

Now, according to a source within the administration, it's about do mark it down again to just half a per cent.

The forecast comes next week.

And, if confirmed, would be another strand in a pattern of global softening.

As calibrated by the IMF and World Bank meetings in Washington this week.

(SOUNDBITE) (English) IMF MANAGING DIRECTOR, CHRISTINE LAGARDE, SAYING: "Our forecast for growth this year is 3.3 percent, going back up we hope in 2020 based on our forecast to 3.6 percent.

But we contend that we are at a delicate moment." Made delicate because of unresolved trade tensions, the threat of Britain crashing out of the EU.

And - for Germany - risks from within the euro zone itself.

(SOUNDBITE) (German) PRESIDENT OF GERMAN INSTITUTE FOR ECONOMIC RESEARCH (DIW), MARCEL FRATZSCHER, SAYING (on ITALY): "A deep recession in Italy would also hit Germany hard because Germany receives a lot of advances from Italy.

It is an important trade partner and I see this risk as bigger than a hard Brexit." The good news, the DIW says, is that Germany will pick up again later in the year.

Finance minister Olaf Scholz, speaking at the Washington meetings, told reporters private consumption and state spending would help.

As will plans for income tax cuts worth 10 billion euros a year.

But if they don't, and Germany worsens, it will pose an unenviable choice for the ECB.

After announcing a series of cheap loans or TLTROs, it may, sources say, even look at paying banks to pass through to the economy the cash they borrow.

Just months after ending a 2.6 trillion euro quantitative easing programme, the European Central Bank once again looking at ways to stimulate the economy.

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