The German government is set to halve its 2019 growth forecast for Europe’s biggest economy, a government source told Reuters on Friday, reflecting a worsening slowdown linked to a recession in the manufacturing sector.
The source said the government, which will give an updated forecast next week, expected the economy to grow by 0.5 per cent, lower than a recent estimate of 0.8 per cent by Germany’s leading economic institutes.
The economy ministry said Germany’s export-dependent manufacturers were likely to continue feeling the bite of falling orders from abroad and that Europe’s biggest economy was getting growth impetus mostly from the domestic market.
The solid services and construction sectors should more than compensate for the downturn in manufacturing in the first quarter, the economy ministry added.
Unresolved trade disputes, uncertainty linked to Britain’s planned departure from the European Union and a slowing world economy have hit foreign demand and hurt German manufacturers.
That has plunged the manufacturing sector into a contraction and prompted a slowdown in the broader economy, which has grown in each of the past nine years, according to Reuters news agency.
The government source said Economy Minister Peter Altmaier expects a growth rebound next year to 1.5 per cent.
“The German economy is showing a mixed picture,” the economy ministry said in its monthly report. “Services and construction in particular remain in good shape. The industrial sector is going through a weak phase due to the slowing world economy.”
Industrial activity should remain subdued even though dampening effects like stricter pollution standards that are challenging carmakers and low water levels that disrupted deliveries have faded, the ministry said.
Should the slowdown in Germany worsen, pressure on the European Central Bank to provide more stimulus for the euro zone economy would grow.