Bundesbank lowers German growth forecast to 1.5 percent

14:39 | 19/12/2018 Global Economy

Germany's central bank (Bundesbank) lowered its growth forecasts for the German economy last Friday.

Photo: dw.com

Bundesbank President Jens Weidmann explained that "from today's perspective, economic growth is dominated by downside risks".

Economists at the Bundesbank expect a calendar-adjusted increase of Germany's gross domestic product (GDP) of 1.5 percent in 2018. Back in June, the anticipated growth rate was 2 percent. For 2019, Bundesbank expected the GDP to grow by 1.6 percent.

According to Bundesbank, the German economy is likely to "remain in a boom" despite a setback during the third quarter of 2018, which saw the German GDP decline for the first time since 2015.

Germany's leading economic institutes have attributed this decline primarily to problems in the automotive industry, which struggles with the introduction of the new emissions testing regime WLTP. Additionally, low water levels on Germany's most important waterway, the river Rhine, hampered the country's economy during the dry summer.

Besides Bundesbank, the German Institute for Economic Research (DIW) and the Kiel Institute for the World Economy (IfW) have also cut their growth forecasts for the German economy, but their general outlook remained positive. "The danger of a recession is low," said Claus Michelsen, an economic expert at DIW.

Bundesbank expects capacity utilization, which is already at a high level in Germany, to continue to rise. German GDP will increase at "a slightly faster pace than the potential output."

Theo China.org.cn