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Bundesbank slashes German growth predictions

June 7, 2019

Germany's Bundesbank has cut its projections for economic growth in 2019, citing "lackluster" exports. It said both growth and the inflation rate in the eurozone's biggest economy were currently facing risks.

Cranes in Hamburg against sunset
Image: picture-alliance/dpa/A. Heimken

Germany's Bundesbank on Friday gave a bleak assessment of the country's current economic prospects, cutting its forecast for 2019 GDP growth to just 0.6% from the 1.6% it predicted in December.

It also lowered its prediction of 1.6% growth in 2020, made six months ago, to 1.2%.

"The German economy is currently experiencing a marked cooldown," the central bank said in a twice-yearly update of its predictions. "This is mainly due to the downturn in industry, where lackluster export growth is taking a toll."

The central bank also warned of further possible dangers to output, despite not expecting a more protracted decline.

"For economic growth and, to a lesser extent, for the rate of inflation, it is the downside risks that predominate as things stand today," it said.

Germany's Federal Statistics Office on Friday backed up the Bundesbank's concerns, saying that exports had dropped by 3.7% in April compared with the month before and 0.5% compared with the same month last year. The German trade association BGA attributed the fall to "global unrest" both in politics and trade.

Read more: German bond yields at record lows amid recession fears

Jens Weidmann
Weidmann and the central bank said downside risks predominated at the momentImage: Getty Images/S. Gallup

Exports expected to rise again

The bank said it still expected 1.4% inflation this year, but predicted that because of weak growth, prices would rise much slower than previously thought.

On a more positive note, the bank said it reckoned on exports rising in the second half of the year, leading to an increase in production by industry.

"As soon as the demand from abroad gains momentum, the growth of the German economy will again stand on a broader footing," Bundesbank President Jens Weidmann said.

The German government also recently reduced its projections for economic growth in 2019 to 0.5 % from an original 1.0%.

tj/sms (Reuters, dpa)

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