BERLIN (MNI) – The economic panel of the German Banking Association
(BDB) on Wednesday lowered its GDP forecasts for Germany to +2.8% this
year and +1.1% in 2012, from the +3.0% and +2.3% figures it had
projected in March.

“After the swift and strong recovery from the recession, the growth
outlook has clouded surprisingly quickly over the summer,” the chief
economists of the top private banks in the country said in their joint
forecasting report.

In particular, elevated public debt levels and only slowly
declining budget deficits in the major industrial states are causing
large uncertainties, the report noted.

“At the same time, one has to warn against exaggerated fear in this
environment marked heavily by risks and apprehension,” the bank
economists cautioned.

“The elevated public debt is — with a determined economic policy
reaction — manageable, and an economic state of shock like the one in
autumn of 2008 is very unlikely,” they argued.

Still, the necessary budget consolidation and structural reforms
will dampen economic growth in the major industrialised countries, the
report remarked.

However, the emerging economies will remain in good condition
overall, the bank economists predicted. “A global recession is not to be
feared,” they reckoned.

The forecasts for Germany’s public deficit this year and next were
lowered by the bank economists to 1.8% and 1.2% of GDP from the
previously projected 2.4% and 1.7%, respectively.

German inflation is now forecast at +2.4% this year and +2.0% next
year (previous forecast: +2.2% and +2.1%).

Eurozone HICP inflation is expected by the bank economists to
average +2.5% in 2011 and +1.9% in 2012. In March, they had forecast
inflation of +2.2% and +2.1%.

Eurozone GDP forecasts for this year and next were cut to +1.7% and
+0.8% from the +2.0% projected in March for both 2011 and 2012.

The European Central Bank is expected to keep its interest rate
unchanged at 1.5%. “An interest rate cut next year would only be likely
if economic growth should weaken even further,” the bank economists
said.

–Berlin bureau: +49-30-22620580; email: twidder@marketnews.com

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