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Global Economic Growth: Germany reduces 2008 GDP outlook

Posted December 26, 2007

"Stagnant domestic demand — even in a growth year — is an indication that the modest growth of the past year depends on other countries' willingness to consume." — J. Christoph Amberger

by J. Christoph Amberger 

Baltimore — (TFN): In late October, the German government reduced forecasts for 2008 GDP growth from 2.4% to 2%. Apparently, they were still shooting too high. Today, two of the top German economic institutes further revised the prospects of the EU's strongest economy.

The Institut für Weltwirtschaft in Kiel (IfW) now estimated growth of just 1.9%. The Munich-based Ifo-Institut went from 2.5%  to just 1.8%.

Germany's economic recovery after a 15-year stagnation is due in part to the country's booming export industry. But stagnant domestic demand — even in a growth year — is an indication that the modest growth of the past year depends entirely on other countries' willingness to consume.

Any drop in consumer demand from the US, or a further erosion of the dollar against the euro is likely to further compromise the sustainability of the recovery: Every 10% devaluation in the dollar is estimated to reduce growth by another half percentage point.

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Posted by J. Christoph Amberger · Filed Under International Investing 

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