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German Growth Outlook Remains Bright

The outlook for the German economy, the biggest in the 12-country eurozone, this year remains favorable despite the slowdown in growth at the end of last year, both the Economy Ministry and the Bundesbank found on Feb. 17. "We expect a higher rate of growth and a wider basis for growth," said Bundesbank's chief economist Hermann Remsperger.

Official data published earlier this week showed that the German economy ground to a halt in the last three months of 2005, halted by weak consumer demand. Gross domestic product (GDP) stagnated in the October-December period, after expanding by 0.6% in the preceding three months, casting doubts over the sustainability of the nascent economic recovery in Germany.

But the economy ministry was confident that the economy would pick up speed again. "Economic developments should already have started to regain momentum. The recovery is continuing, as is shown by the majority of indicators," the ministry said.

Growth was unlikely to accelerate smoothly in the coming quarters, since it would be distorted by special factors such as the upcoming World Cup soccer championships and the pending rise in value-added tax (VAT) at the beginning of next year, which was likely to lead to increased consumer purchases beforehand, Remsperger said. Underlying private consumption was likely to improve only gradually due to high oil and energy prices.

Copyright Agence France-Presse, 2006

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