|
German growth target cut
|
 |
October 18, 2001: 5:40 a.m. ET
Finance Minister Eichel slashes 2001, 2002 growth forecasts
|
LONDON (CNN) - German Finance Minister Hans Eichel sharply lowered forecasts for growth in Europe's biggest economy this year and next.
In an interview with ZDF television, Eichel said the economy would grow 0.75 percent this year, that is down from the previous official forecast for 2001 of two percent growth.
And growth next year will be between 1 and 1.5 percent, down from the previous target of 2.25 percent.
"We have at the moment this year growth of under one percent," said Eichel.
"We have to draw up new estimates but I think we will reach three-quarter percent. Next year we will clearly come in below the two to two-and-a-quarter percent we had assumed, it will be somewhere between one and one-and-a-half."
Eichel said the slowdown would force the government to rework its financial plan and did not rule out a rise in new borrowing, but said its goal of balancing its budget by 2006 was unchanged.
Germany's export oriented firms have been hit hard by the global slowdown and domestic demand in the first half was held back, despite income tax cuts at the start of the year.
German business software company SAP, the world's biggest, lowered its full-year revenue growth forecast on Thursday, saying customers were delaying orders. The company plans to cut more jobs.
Although oil prices are now sharply lower, domestic demand is expected to continue to remain subdued in the wake of huge layoffs that have been announced in the hi-tech and financial sectors. Unemployment has risen consistently all year.
The German communications and engineering giant Siemens is cutting 17,000 jobs this year and Commerzbank, the country's fourth biggest bank, axed 3,400 posts. Other German banks are expected to announce jobs cuts in the coming weeks.
The prospect of the government sticking to its goal of cutting borrowing next year to  21.1 billion would now be "very difficult," said Eichel.
Eichel repeated he would do everything to avoid a rise in borrowing due to government policies, such as recently announced spending on security measures after the September 11 attacks in the United States, but added: "It's a different case when the economy does not go well, that you can't change."
--Reuters contributed to this article 
|
|
|
|
|
 |
|
