The German economy is the largest within the 17 member Eurozone and the larger 25 member European Union and as such, its fortunes are inextricably linked to those of the European Union. It is therefore somewhat disconcerting that Germany has re-evaluated its growth projection for 2013 from 1.6% down to just 1%. The realignment puts the Government’s forecast in line with the prognostications of four leading think tanks which have also trimmed expectations in the light of current economic realities.
The German Economy Minister, Philipp Roesler, was at pains to point out that the economy is still projected to grow: "We are still talking about 1% growth , so there's no talk about a crisis for Germany. Germany is navigating stormy waters because of the European sovereign debt crisis and an economic weakening in emerging nations in Asia and Latin America". A small ray of sunshine was delivered in the shape of a better forecast for growth in the current year which was adjusted up from 0.7% to 0.8%.
The factors behind the revision largely lie outside Germany itself. Global demand has slowed over the course of the year which hurts Germany as a major exporting nation. Equally, the on-going European sovereign debt crisis saps business confidence and has had the effect of choking off liquidity in the banking sector meaning that business loans are harder to come by. This is because banks have become more cautious about lending to businesses as they seek to increase their own capital holdings to be better placed to deal with a further round of the financial crisis, should it happen. On the other side of the coin, Germany’s competitively in non-Eurozone markets has been bolstered by the relative weakness of the Euro.
In 2010 and 2011, the German economy posted growth figures of 4.2 and 3.1% respectively. Of course these figures came off a low financial base coming in the wake of the first wave of the global recession.