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Germany’s five leading research institutes slashed their forecasts for economic growth, as manufacturers in Europe’s biggest economy struggle with waning global demand and lingering trade disputes.
Gross domestic product will expand by 1.1% in 2020, the experts predicted in their latest bi-annual outlook published Wednesday in Berlin. In April, they expected growth of 1.8%. Their report forms the basis of the government’s forecasts, due to be updated around the middle of this month.
“The reasons for the cooling in growth are primarily to be found in manufacturing,” the forecasters said. “Production there has been shrinking since the middle of last year, particularly as demand for capital goods in key markets has weakened.”
Even after the downgrade, the institutes are still above the consensus for 2020. A Bloomberg survey of economists last month predicted 0.9% growth, while the OECD is even lower at 0.6%.
For this year, the German researchers cut their forecast to 0.5% from 0.8%, which would be the worst performance since 2013. The economy probably shrank in the third quarter, meaning Germany slipped into a technical recession after a 0.1% contraction in the April-June period, they added.
“Capacity utilization is still somewhat above the long-term average, so it’s too early to talk of an economic crisis,” the institutes wrote. Their prediction for 2019 is in line with the Bloomberg survey of economists.
The five institutes are the DIW (Berlin), IWH (Halle), Ifo (Munich), IfW (Kiel) and RWI (Essen). The Zurich-based KOF institute and the IHS institute in Vienna also help draw up the forecasts.