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Germany faces protracted slowdown, job losses

Germany faces a marked rise in unemployment and a further slowdown in economic activity before a recovery in the second half of 2009, the Organisation for Economic Cooperation and Development (OECD) forecast.

“Although the economy is expected to recover beginning in the second half of 2009, annual average growth is projected to fall to -0.8% in 2009,” the Paris-Based OECD said.

A recovery in Europe's largest economy would gain traction in 2010, when it would grow by 1.2%, adjusted for working days, the OECD forecast in its twice-yearly Economic Outlook. Germany fell into a recession in the third quarter of the year and economists fear the worst is yet to come as businesses rein in investment and nervous consumers curb their spending in anticipation of a deep downturn and job cuts.

“Unemployment will rise significantly from its current low levels, with initial job terminations mainly hitting temporary workers,” the OECD said.

Germany's jobless rate fell in October to a 16-year low of 7.5%.

As the world's biggest exporter of goods last year, Germany was expected to be “severely hit by the global slowdown via lower growth of export markets,” the OECD said.

“On the positive side, the German economy is likely to be less affected by the global housing downturn, as prices and construction did not increase sharply during the previous boom, unlike developments in many other countries,” it added. (Reuters)