Germany financial CRISIS: IFO slashes German GDP growth over Brexit, Trump and Italy

Tuesday, June 19, 2018
By Paul Martin

GERMANY’S hugely influential lFO institute has slashed its forecasts for growth in Europe’s biggest economy this year and next as Germany struggles to respond to the increased risk of a global trade war.

By DAVID DAWKINS
Express.co.uk
Tue, Jun 19, 2018

The Munich-based IFO Institute for Economic Research said it expected the German economy to grow by 1.8 percent this year and in 2019, a big revision downwards from previous forecasts of 2.6 percent and 2.1 percent respectively.

IFO economist Timo Wollmershaeuser said: “The economy developed significantly more weakly than anticipated in the first few months of the year.

“The global economic risks have risen significantly.”

The significant climbdown comes just one week after the European Central Bank slashed its forecast for eurozone economic growth from 2.4 to 2.1 percent, while the German Bundesbank cut its prediction for the same period from 2.5 to 2 percent.

Bundesbank President Jens Weidmann warned last week that the German economy is back under pressure due to a shift in global sentiment.

He said: “Uncertainties regarding the prospects for the German economy are considerably greater than they were.”

The central bank statement adds that “risks relating to the external environment outweigh the effects resulting from the probably more expansionary fiscal policy in Germany”.

Germany is most concerned by the dual threat of a trade war with the US, and noises from Italy that it may leave the eurozone, or default on its staggering public debt of €2.3 trillion euros (£2.02 trillion).

The new Italian coalition government, made up of anti-establishment parties who rode to power on a promise to shake up EU institutions, has unnerved German companies.

Ifo’s Wollmershaeuser said: “The downside risks for the German economy have significantly risen.

“Germany’s economic advantages are far outweighed by two risks — euro crisis 2.0 through Italy and a trade war.”

On the gathering pace of the Trump-led US-EU trade dispute, according to the IFO, German business leaders are worried that a trade confrontation between the United States and China could harm exporters that rely on the world’s two largest economies for growth.

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