Germany’s main industry lobby trimmed its 2014 growth forecast for Europe’s largest economy on Thursday to between 1.2 and 1.4 per cent but said it did not expect the country to slip into a much-feared recession.

That compares with the BDI group’s September growth prediction of 1.5 per cent. At the start of the year, the association had estimated the economy would grow by 2 per cent this year.

The economy had a strong start to the year but contracted in the second quarter and some economists have cautioned that a recession could be on the cards.

The BDI said the European Union’s sanctions against Russia were partly to blame for its more downbeat assessment but added that while these were reflected in German export figures, this had, until now, been more than offset by shipping more to other countries.

It said that if the conflict escalated again and caused disruption to oil and gas deliveries from Russia, this could have serious consequences for the German economy.

"The economic prospects have worsened," BDI managing director Markus Kerber said, adding that the economy was primarily suffering from a lack of investment.

He said high unemployment and weak growth in the euro zone were weakening the investment climate, as were crises in Ukraine and the Middle East.

“Low interest rates and good financing conditions alone are not currently a guarantee for more investment in Germany,” he said.

The German government has also sharply cut its growth forecasts to 1.2 per cent for this year and 1.3 per cent for next year.

Reuters