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German gov’t revises down growth forecast for 2009

The German government on Thursday lowered its forecast for economic growth next year from 1.7 to 1.2%, which would be the lowest level since 2005.

According to statement released by the German Economy Ministry, the government still holds on to its forecast of 1.7% growth for 2008, citing reasons such as dynamic investment, high capacity utility and sufficient industrial orders. “The economy is now in a decent shape. We still see an upswing despite headwind,” said German Economy Minister Michael Glos. “For the coming year, the government expected a lower economic growth, not least because of the fewer number of working days. We are thus more cautious than the official projections of the economic research institutes,” Glos said.

The Economy Ministry said that Germany’s growth is expected to be driven increasingly by the private consumption with a possible slowdown in export expansion. The consumption of households is expected to grow 0.8% this year and 1.3% next year.

Inflation in Europe’s largest economy is projected to be as high as 2.6% this year, and would go down to 1.8% in 2009, according to the government forecast. Amid growing concerns about record oil prices and the stronger euros, business confidence in Germany fell in April to the lowest level in two years, the Ifo research institute in Munich said on Thursday. (