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Last Updated:  Wednesday, 26 February, 2003, 08:03 GMT
German economy at a standstill
Germany sweets factory
The outlook for Germany's economy is not so sweet
Germany's economy stopped growing at the end of 2002, after showing only minimal expansion during the rest of the year.

The Federal Statistics Office said there was zero growth in the October to December period, and confirmed that for the whole year gross growth in economic output - or GDP - was just 0.2%.

"This was a 'red zero'," said Lothar Hessler of HSBC Trinkaus & Burkhardt.

"We still expect Germany to fall into a slight recession in the first quarter [of 2003]."

But the October to December data, which showed the economy had expanded by 0.5% from the same period in 2002, was better than some analysts had predicted.

Many observers had forecast that the economy would have contracted by 0.1% over the year.

Deficit breach

The statistics office also revised down Germany's public deficit for 2002, but it was still higher than the EU limit laid down in the Stability and Growth Pact, which underpins the euro.

The deficit was revised to 3.6% from an earlier estimate of 3.7%.

Eurozone countries are not allowed to run up deficits in excess of 3% of gross domestic product.

Germany and France have proposed loosening the stability pact rules if the UN Security Council authorises military action against Iraq.

Rate cut?

German capital investment in the fourth quarter was up 1.4% compared with the third quarter, and private consumption rose 0.1%, the statistics office said.

Germany's influential Ifo business confidence index rose for the second month in a row in February to its highest level in seven months.

Nonetheless, the European Central Bank is expected by many analysts to cut interest rates when it meets on 6 March.

Exports were up 0.3% on the quarter while imports rose by 1.9% in the quarter as the euro hit near four-year highs against the dollar.

Worst is over, say German firms
25 Feb 03 |  Business
German economic woe escalates
29 Jan 03 |  Business

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