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0.4 percent growth witnessed by Germany in 2013

The Sydney News.Net Wednesday 15th January, 2014

BERLIN - German economy witnessed weaker than expected growth of 0.4 percent last year down from 0.7 percent in 2012 and the worst since 2009, in the midst of the global financial crisis, according to the first official estimates.


In 2011, Germany had witnessed a staggering 3.3 percent growth.

The preliminary data from the German statistics agency suggests that Europe's largest economy saw little or no growth in the final three months of the year.

Most economists are however optimistic that the economy will bounce back in 2014 with growth of up to 2 percent. The government is however forecasting 1.7 percent.

While the domestic demand was stronger, the weaker global economy and the troubles of the eurozone continued to take a toll on exports, which remained flat.

In 2014, there is optimism of trade increasing as growth in Germany's key trading partners picks up.

"Apparently, the German economy was slowed by the recession in many eurozone countries as well as by sluggish global demand ," said Destatis President Roderich Egeler told reporters in Berlin.

Egeler also said that robust domestic consumption could only partly offset a decline in investment and a slowdown in export growth.

With export growth slowing, Albert Braakmann of Destatis estimated that Germany's current account surplus amounted to 6.1 percent of GDP in 2013, though the private Ifo Institute has put this number above 7 percent. Germany's surplus has averaged 6.5 percent over 2010-2012, the number used for the purposes of the EU Commission's investigation launched last year into Germany's excessive imbalances.

Destatis noted that all growth impetus in 2013 came exclusively from

domestic consumption, with households adding 0.5 percentage points to GDP and government spending adding 0.2 points to GDP.

Domestic investment by contrast subtracted 0.1 percentage points. Inventory changes were flat on the year after subtracting 0.5 percent from growth in 2012.

Unlike many of its eurozone partners, however, the German economy didn't fall back into a recession last year. This was primarily due to strong consumer spending driven by record employment, Destatis said.

Private consumption rose 0.9 percent in 2013, while state spending expanded by 1.1 percent.

Germany's economy has remained a strong point of the eurozone, and was credited with helping to haul the single currency bloc out of recession last year.

Destatis cautioned that its 4Q figures are a rough estimate, based on

estimates for unavailable December data. Official 4Q preliminary figures are scheduled for release on February 14, with a detailed breakdown planned for February 25.

The government posted a deficit of minus0.1 percent in Maastricht terms, with a budget shortfall of just euro1.7 billion, after a surplus of plus 0.1 percent in 2012, or euro 2.3 billion. Spending grew 2.8 percent while revenue climbed 2.5 percent over the year.

Germany's economic recovery is widely expected to pick up speed in 2014, driven by ongoing solid consumption and a further rebound in domestic investment after two negative years, as well as increased demand from other Eurozone members as the continent continues to pull itself out of recession.

The Bundesbank in December raised its 2014 growth forecast to plus 1.7 percent from a June projection of plus 1.5 percent. Most other forecasts for 2014 range from plus 1.5 percent to plus 1.9 percent. Growth for 2015 is seen recovering further, to plus 2.0 percent, according to the Bundesbank.

Joerg Kraemer, chief economist at Commerzbank, said: "We're expecting growth this year of 1.7 percent. The German economy has been picking up since the spring and the pace will pick up."

He said improvements in the rest of the eurozone and the US - minus both big export markets - would help Germany to grow and outperform the rest of the eurozone "for several years to come".

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