IMF cuts German growth forecast

AAP

The International Monetary Fund has lowered its forecast for German growth this year, but predicted that Europe's biggest economy will experience a recovery in the second half of 2013.

"Amid still elevated euro area uncertainty, we now project GDP (gross domestic product) in Germany to expand at around 0.3 per cent in 2013," compared with a previous forecast of 0.6 per cent, the IMF said in a statement on Monday.

Growth this year was expected to be weak, the IMF said.

Nevertheless, a recovery in activity in Germany was expected in the second half of 2013.

But the IMF added that a more robust rebound was being held back by continued weakness in business investment.

Consumption had been robust, domestic fundamentals remained strong and past reforms had paid off in low unemployment, but business investment had been declining since late 2011, it said.

Uncertainty about the prospects for the euro area in face of the ongoing recession had hit both exports and business investment.

A gradual pick-up in activity projected towards the end of the year was conditional on "a further and tangible reduction in this uncertainty" and the expected gradual recovery in the rest of the euro area.