Leading German think tank almost halves country’s growth prediction

Germany has had its growth forecast for 2019 almost halved by one of the country’s top think tanks, adding to its economic gloom.

GDP growth this year will be just 0.6 per cent, the Ifo Institute said today. It had previously predicted growth of 1.1 per cent.

Read more: No-deal Brexit could hit Germany's economy, industry body warns

The think tank raised its prediction for growth in 2020 from 1.6 per cent to 1.8 per cent, however, and said the euro area as a whole would grow by one per cent in 2019, rising to 1.5 per cent in 2020.

There is consensus over Germany’s poor outlook. Earlier this month the Organisation for Economic Cooperation and Development (OECD) slashed its growth prediction for 2019 by more than half to just 0.7 per cent. In November, it had predicted growth of 1.6 per cent in 2019.

The German economy narrowly avoided recession at the end of 2018, shrinking 0.5 per cent in the third quarter and registering zero per cent growth in the fourth.

“Uncertainties with regard to the reintroduction of customs duties, the outcome of Brexit negotiations, and the economic policy decisions of the new Italian government have left deep marks on the most important German sales markets”, the Ifo Institute said.

“This year, the German economy is likely to grow again somewhat more strongly than in the second half of 2018, as the production difficulties of German industry are likely to be gradually overcome”, with “domestic drivers still intact”.

Read more: OECD slashes growth forecasts and warns of no-deal Brexit recession

Employment should hit record highs in 2019, the institute said, reaching 45.2m people, up from last year’s figure of 44.8m. It said strong wage growth, low inflation, and tax and duty relief should make 2019 a good year for German consumers.

The Ifo Institute’s Timo Wollmershaeuser said: “This will bolster private consumption and the construction industry.”