Economists Predict Gloomy 2003

The sputtering German economy is not likely to pick up steam soon, according to economists at the German Institute of Economic Research (DIW), who on Tuesday released their 2003 growth forecasts for the German economy. The institute lowered its growth estimates for this year to 0.6 percent, compared to earlier estimates of 0.9 percent. An overall upswing in economic performance could be some years off, according to researchers. They forecast GDP growth in 2004 will remain weak, likely not exceeding 1 percent. DIW chief Klaus Zimmermann said he could no longer rule out the possibility of Japan-style deflation. He called on the European Central Bank to lower interest rates to counter the danger.

DIW researchers blamed the dire economic situation partly on Germany’s weak domestic market and criticized the current government for not doing more to reduce taxes and payroll deductions, thereby leaving consumers with more disposable income. The overall low growth rates mean unemployment will likely stay high; DIW forecasts 4.2 million Germans will be out of work in 2003.