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German Growth Outlook Cut

There was more bad news for the Eurozone’s economic outlook today as the German central bank cut its growth forecast for the nation.

Yesterday statistics confirmed that the 17-nation currency bloc entered recession in the third quarter and the European Central Bank slashed its growth forecasts for the region.

This latest development shows how Germany is being affected by the slowdown.

Bundesbank, Germany’s Frankfurt-based central bank, previously forecast that the nation’s economy would grow by 1 per cent this year. They have now slashed that figure to 0.7 per cent, detailing contraction in the fourth quarter of this year and stagnation in the first quarter of next.

Growth expectations for 2013 were similarly negatively revised, slashed from 1.6 per cent to just 0.4 per cent.

Bundesbank is forecasting growth expanding to 1.9 per cent in 2014.

The central bank issued a statement to accompany its figures which asserted that German economic prospects have ‘clouded’ as a result of ‘a severe adjustment recession in parts of the Euro region and the slowdown of the global economy. However, there’s reasonable hope that the phase of economic weakness won’t last too long and Germany will return to growth.’

Bundesbank went on to assert that it seems ‘probable that the economic situation in the Euro area will stabilize over the course of the coming year, and that a nascent recovery will follow, if only hesitantly at first. The precondition for this is that the sovereign debt and banking crises in the Euro area do not further intensify and that consolidation and reform efforts continue.’

‘It is quite conceivable that the euro area will recover sooner and the world economy will accelerate faster than assumed in this projection. In this case the German economy, in view of its sound underlying health, may be expected to utilize the additional growth opportunities that arise. [However] should global economic growth remain below expectations or the sovereign debt crisis escalate further in some countries, it is probable that the German economy may follow a weaker course than the one assumed in the baseline scenario.’

An economist with Unicredit Group commented: ‘The Bundesbank isn’t as negative as the 2013 growth forecast suggests. The predicted contraction in the fourth quarter has a big impact on next year’s growth rate. In fact, the forecasts suggest the Bundesbank expects a recovery from spring leading to relatively strong growth in 2014.’

As the Eurozone’s largest economy German growth is highly influential. After Bundesbank’s decision was made public the Euro declined by quarter of a US Cent.

As of 10:08 am

The Pound to Euro exchange rate is currently trading at 1.2392

The Pound to US Dollar exchange rate is currently trading at 1.6033

The Pound to Australian Dollar exchange rate is currently trading at 1.5312

The Euro to US Dollar exchange rate is currently trading at 1.2935

The Euro to Pound exchange rate is currently trading at 0.8067

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