BERLIN ? Germany's government cut the country's 2012 growth forecast Wednesday in the wake of a faltering global economy and Europe's debt crisis, but said Europe's largest economy should avoid sinking back into recession.
Following what is believed to have been a contraction in economic activity in the fourth quarter of 2011, Economy Minister Philipp Roesler said the government had reduced Germany's growth forecast for this year to 0.7 percent from 1 percent ? its second reduction in three months. As recently as October, the prediction had been 1.8 percent.
Germany's economy, the world's fourth largest, is thought to have contracted by up to 0.3 percent in last year's fourth quarter compared with the previous three-month period, though final numbers are not yet in.
Roesler said he expects growth of 0.1 percent in the current quarter, which would mean that Germany avoids slipping into a technical recession, defined as two consecutive quarters of negative growth.
Other forecasters have painted a bleaker picture, however, with many ? such as Commerzbank last week ? predicting that Germany will fall into a modest recession in the first quarter before returning to growth.
Roesler said "a temporary dent in growth can be expected for the coming months" but predicted that "the economy will gradually liven up over the course of 2012." Growth next year is expected to be 1.6 percent, he said.
Roesler conceded there were risks around the forecasts, not least from financial market turbulence and the debt crisis in the 17-country eurozone.
"Germany remains on the course of growth ? assuming that there is no new sudden crisis on the financial markets, and the uncertainty in the eurozone above all gradually abates," said Roesler, who is also Germany's vice chancellor.
Over 2011 as a whole, Germany grew by 3 percent ? following a growth spurt of 3.7 percent in 2010 after its emergence from recession the previous year.
That contrasted with the performance of many of its partners in the eurozone, which have seen their economies barely grow or shrink amid debt troubles and tough austerity measures.
The German government figures come after the World Bank forecast that the eurozone economy as a whole will contract by 0.3 percent this year. It sees the United States growing by 2.2 percent, Japan by 1.9 percent and China by 8.4 percent.
Exports have been the bedrock of Germany's growth over recent years, but Roesler said this year's expansion will stem from stronger domestic demand. His ministry forecast that export growth will slow to 2 percent from 8.2 percent last year.
It also expects a further improvement in Germany's already-bright labor market picture, with the average unemployment rate this year projected to fall from last year's 7.1 percent ? already a two-decade low ? to 6.8 percent.
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