Growth in Germany expected to slow

A Mercedes- Benz factory in Rastatt, Germany. The Bundesbank warned last month that the nation's growth momentum could slow in the second quarter as weakening exports prompt firms to curb output and hiring.
A Mercedes- Benz factory in Rastatt, Germany. The Bundesbank warned last month that the nation's growth momentum could slow in the second quarter as weakening exports prompt firms to curb output and hiring.PHOTO: REUTERS

FRANKFURT • German economic growth may be held back by euro area weakness and a slowdown in emerging markets, according to the Organisation for Economic Cooperation and Development (OECD).

Gross domestic product in Europe's biggest economy will expand at 1.3 per cent this year compared with 1.4 per cent last year, and accelerate to 1.7 per cent next year, the OECD projected in a report yesterday.

Export growth, expected to slow to 1.6 per cent this year from 4.8 per cent last year, will climb to 3.6 per cent next year, it said.

The report coincided with data released by Germany's Economy Ministry on factory output, which showed that orders unexpectedly fell in February in a sign that a global trade slowdown is weighing on the country.

Orders, adjusted for seasonal swings and inflation, dropped 1.2 per cent from the preceding month, when they rose by a revised 0.5 per cent, data from the Economy Ministry in Berlin showed.

While Germany corporate confidence improved last month because of robust domestic demand, exporters are struggling with a China-led slowdown in emerging markets.

The Bundesbank had warned last month that the nation's growth momentum could slow in the second quarter as weakening exports prompt companies to curb output and hiring.

Germany is also vulnerable to risks from possible turmoil in the 19-nation euro area and an increase in migrant flows, according to the OECD report.

"A sharper slowdown of activity in emerging markets and renewed weakness of activity in the euro area could weaken exports more strongly than projected, damp investment and spill over to consumer confidence," the Paris-based OECD said in its report.

While Germany's current account surplus "remains large", the country has weathered global pressure on trade as rising consumer demand has picked up the slack, the OECD said. The organisation called on German policymakers to ease access to the labour market, particularly for migrants, which could help offset an ageing population. The OECD renewed criticism of German regulation barriers in professional services, suggesting that the restrictions hold back productivity.

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A version of this article appeared in the print edition of The Straits Times on April 06, 2016, with the headline 'Growth in Germany expected to slow'. Print Edition | Subscribe