German Economy Expected To Contract In 2009

Germany’s central bank said it expects the country’s economy to shrink 0.8% next year as the global financial crisis takes its toll, according to the Associated Press. This just as their parliament gave its final approval to an economic stimulus package that has been criticized as too timid. The package is expected to cost the government euro23 billion ($29 billion) and trigger investments of up to euro50 billion.

Germany, Europe’s largest economy, slipped into recession in the third quarter as exports weakened. Still, the slowdown has yet to translate into higher unemployment and lower consumer confidence. The central bank also said that, assuming the situation on financial markets calms and the global economy picks up, the German economy is likely to grow by 1.2% in 2010.

But the bank’s outlook for next year is far worse than the German government’s current official forecast, which was set in mid-October, of 0.2% growth. The country’s Economy Ministry, said that new industrial orders dropped 6.1% in October from the previous month, following an 8.3% fall in September. ❖