The Ifo economics research institute announced today that the upturn had arrived in German economy, but suggested recovery would not be as strong as some people hoped.
Ifo President Mr Hans-Werner Sinn said his institute was raising only slightly its forecast for gross domestic product (GDP) growth this year to 0.7 per cent from a previous prognosis of 0.6 per cent.
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By contrast, German economy minister Mr Werner Mueller told the same conference that he was sticking his neck out with a growth forecast of 1.2 per cent this year.
"Personally, I'm convinced that we'll see a 'one' in front of the decimal point this year," Mr Mueller said.
"GDP grew by only 0.2 per cent in the first quarter. But the government expects growth to gather momentum during the rest of the year thanks to the ongoing global recovery," he said.
Asked to make a concrete forecast, he suggested growth of 1.2 per cent was feasible.
Ifo's Mr Sinn acknowledged that there was "no doubt that the global recovery has touched Germany and the tempo will increase in the second half of the year."
But with investment expected to shrink by more than three per cent over the whole of the year, "all in all, growth will remain very restrained," Mr Sinn said.
Regarding the other key economic indicators for Germany, Mr Sinn predicted the average annual rate of inflation would reach 1.6 per cent this year and moderate further to 1.5 per cent in 2003, well below the 2.0 per cent which the European Central Bank regards as the upper limit to price stability.
AFP