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Short-lived contraction

December 13, 2012

Germany's renowned Ifo institute has insisted the country's economy would expand again as early as next spring, following a brief contraction period. It says domestic and extra-European demand will prevent a recession.

https://p.dw.com/p/171ZI
Image: dapd

In its latest business outlook, Germany's Ifo institute on Thursday said Europe's biggest economy must not fear getting mired in a recession. It admitted developments pointed to a contraction in the final months of the current year, but added that output would grow again in spring of 2013.

"We expect the German economy to contract in the final quarter, but we're bound to see a slight recovery early next year," the Munich-based think tank said in a statement.

Ifo President Hans Werner Sinn maintained the recovery next year would be based on healthy domestic consumption and continuously strong demand for German goods and services in regions outside Europe, including important emerging markets.

More jobs not in sight yet

"Domestic demand will see the economy picking up again, unless there's a renewed escalation of the eurozone debt crisis," Sinn commented.

The Ifo economists said they expected the German economy to log 0.7 percent growth throughout the current year and 2013 as well. They added there wouldn't be any recession globally either, but conceded that the leading industrialized nations as well as emerging countries would be able to post only moderate growth figures for some time to come.

The institute said the expected slight recovery of the German economy early next year would not immediately translate to more employment in the country. On the contrary, it expected the number of jobless people to rise by 60,000 in 2013 to total 2.96 million people.

hg/dr (Reuters, dpa, dapd)