Germany economy to return to growth path in the spring

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The FINANCIAL — After a weak winter half-year, the German economy will already be back to a solid growth path in the spring. Although GDP growth in the final quarter of 2011 was negative with -0.2% for the first time in two years, already in the first quarter of 2012 GDP will return to – an initially slight – growth of 0.2%.

 

According to KfW, there after GDP will enter a stronger upwards trend: KfW expects economic growth of 1.2% for the overall year 2012. In its first forecast for 2013 it expects an increase in growth of 1.9%.

 

Although foreign trade will also provide impetus, it is rising domestic demand that will be the decisive driver of growth.

It is therefore not surprising that the business climate of SMEs and large enterprises recently improved across a broad front. In particular the business expectations have clearly recovered and are again above average in the SME sector.

Even if the economic outlook is brighter than just a just a half year ago, the recovery remains vulnerable. There are still significant downturn risks which in the worst case could lead to a contraction of German economic output in 2012 as well.

 

This includes first and foremost the continuing risk of the debt crisis in the eurozone, with the extremely uncertain outlook in Greece – despite the now approved 2nd rescue package – and a possible contagion to other countries.

 

There is also still a lack of convincing solutions to address the immense debt problems of the USA and the United Kingdom. In addition, there remain geopolitical risks such as the clash over the Iranian nuclear programme, for which a supply-side energy price shock cannot be ruled out.

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