The German government cut its 2019 growth forecast for the second time within three months on Wednesday, reflecting a worsening slowdown in Europe’s largest economy driven by a recession in the manufacturing sector.
A difficult trade environment means that Germany’s vibrant domestic demand, helped by record-high employment, inflation-busting pay hikes and low borrowing costs, is expected to be the main driver of growth this year and next.
Economy Minister Peter Altmaier told reporters when presenting the government’s spring forecast.
Altmaier said the slowing world economy, trade disputes and Brexit uncertainty were weighing on the German economy. Domestic factors include the introduction of new car emission regulations (WLTP) and unusually low Rhine water levels which have led to supply and production bottlenecks in the industrial sector.
German exporters are struggling with weaker demand from abroad, trade tensions triggered by U.S. President Donald Trump’s policies and business uncertainty caused by Britain’s planned departure from the European Union.
The government now expects gross domestic product growth of 0.5 percent this year,
In January, the government had cut its growth estimate to 1.0 percent from 1.8 percent previously.
For 2020, the government now envisages a consumption-driven rebound with economic expansion of 1.5 percent.