The German government on Thursday slashed its growth forecasts for 2018 and 2019, blaming “a weaker international trade environment” for sapping the export powerhouse.
After an expansion of 2.2 percent in 2017, gross domestic product should expand by 1.8 percent this year and next, the economy ministry said in a statement.
Compared with April projections, the forecast cut the outlook for 2018 by 0.5 percentage points and for 2019 by 0.3 points.
“An essential reason (for the cut to the forecast) is the weaker international trade environment,” the ministry said, adding that a new emissions test cycle for cars had temporarily slowed production and exports in the vital sector.
Nevertheless, “the economy will enter the 10th year of growth next year — the longest upturn phase since 1966,” Economy Minister Peter Altmaier said.
Berlin points to record low unemployment and rising wages as factors that should sustain economic expansion as companies invest and consumers spend more.
But “growing protectionist tendencies and international trade conflicts lead to uncertainty for the future,” Altmaier said.
“We should reduce tariffs and barriers to trade, not build them up,” Altmaier shot at President Donald Trump, who aims to shrink the US’ yawning deficits in the name of his “America First” policy.
While the European Union has struck a shaky trade truce with Washington, Berlin slashed its outlook for growth in exports for 2018 by almost half, to 2.8 percent, with a smaller cut to the 2019 projection.
Elsewhere in its forecast, the economy ministry pushed back a surge in government spending from this year to 2019, after it took longer than expected for Chancellor Angela Merkel to form her fourth government.
And it sees inflation relatively steady, around 2.0 percent level targeted by the European Central Bank in the coming years.
tgb/hmn/jh
