Europe News

Germany cuts growth forecasts to 1.2% this year, 1.3% next

The German Economy Ministry slashed its forecasts for economic growth on Tuesday to 1.2 percent for this year and 1.3 percent for next year, blaming crises abroad and moderate global growth.

The Reichstag, Berlin, Germany.
Patti Domm | CNBC

That signals a strong downturn in expectations when compared with the ministry's April forecasts for growth of 1.8 and 2.0 percent respectively in Europe's largest economy.

It estimated exports would increase by 3.4 percent this year and by 4.1 percent next year while imports would surge by 4.0 and 5.5 percent.

That means foreign trade will subtract 0.1 percentage points from growth this year and detract an even-bigger 0.3 percentage points next year, the ministry said.

"The German economy is steering through rough foreign waters. Geopolitical crises have also increased uncertainty in Germany and moderate growth is weighing on the German economy," said Economy Minister Sigmar Gabriel, adding that domestic impetus nonetheless remained intact.

Even forecasts for domestic demand were, however, downgraded to an increase of 1.4 percent this year and 1.7 percent next year compared with April's forecasts for gains of 1.9 and 2.1 percent respectively.

Gross capital investment will rise by 3.2 percent this year and by 3.3 percent next, the ministry said.

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