Germany's six leading economic institutes today cut their national growth forecasts for this year and next.
In their semi-annual outlook, the influential institutes criticised government economic policies and said they expected German gross domestic product to grow 0.4 per cent this year, down from a previous 0.9 per cent projection.
Growth next year would be 1.4 per cent, compared with a previous 2.4 per cent forecast, five of the institutes said. Berlin-based DIW said GDP would rise just 0.9 per cent.
"The institutes do not expect another slide into recession, but an improvement will only come next year," the report added, noting this assumed the Iraq crisis would not lead to a military conflict and that oil prices would fall back to $25 a barrel.
As the outlook for Europe's largest economy has worsened, an increasing number of German politicians and economists have called for the European Central Bank (ECB) to cut interest rates to help spur growth.
But the institutes said they saw little grounds for a rate cut, predicting ECB rates would remain on hold until the last quarter of 2003, when they would go up by 0.25 percentage point.
The institutes said they cut their German forecasts because the collapse in global share prices, the slowdown in the US economy and fears of a war in Iraq were weighing on household and business confidence, dampening consumption and investment.