Germany Cuts Economic Growth Forecast

Chancellor Angela Merkel said Europe's biggest economy is cutting its 2008 economic growth outlook to 1.7 percent, but insisted that there is no sign of a recession.

BERLIN (AP) β€” Germany is cutting its economic growth outlook for this year to 1.7 percent, Chancellor Angela Merkel said Tuesday, but she insisted that there is no sign of a recession in Europe's biggest economy.
 
Economy Minister Michael Glos has said repeatedly that the government planned to cut its 2008 forecast from 2 percent, but had not offered a precise figure ahead of his official unveiling of the new outlook, due Wednesday.
 
Merkel, however, said on NDR Info radio that ''we are forecasting 1.7 percent growth this year.''
 
She also echoed other European Union officials' comments that the U.S. economic slowdown should not directly hit the euro area's growth.
 
''Europe counts as an anchor of stability in the world economy,'' she said.
 
''There are no indications of a recession in Germany,'' the chancellor added, arguing that Germans should not rush into ''over-hasty reactions'' to the current outbreak of turbulence on financial markets.
 
The German economy grew by a solid 2.5 percent last year, according to preliminary government figures released last week β€” somewhat lower than the previous year's increase of 2.9 percent in gross domestic product.
 
Germany has been helped out of a lengthy period of stagnation by strong exports and companies' increasing investment in equipment.
 
Still, the unprecedented strength of the euro β€” which recently has hit all-time highs of nearly US$1.50 β€” has raised concerns over the future competitiveness of European exports.
 
At the same time, the U.S. subprime lending crisis and ensuing market volatility have fueled persistent worries over the health of the American economy, and the possible global impact.
 
The government's existing forecast for growth this year of 2 percent dates back to October. That compared with the 2.4 percent it predicted last April.
 
Glos, the economy minister, said Tuesday that ''we in Germany still have a stable economy, and we expect it to remain stable.''
 
''In Germany and in Europe, we are not directly endangered'' by the U.S. financial crisis, he said on the sidelines of a meeting in Berlin.
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