German economic growth projection cut by IMF

Germany's economy relies heavily on exports

The International Monetary Fund (IMF) has cut its 2010 growth projection for the German economy.

The IMF now expects Europe's largest economy to grow by 1.2% this year, down from its previous estimate of 1.5%.

Explaining the downward revision, the IMF highlighted weakness in the German banking sector, and the chance of lower than expected levels of global trade.

The German economy exited recession last year, but failed to grow in the three months from October to December

Cautious outlook

In its report, the IMF said the German economy faced "substantial downward risks" in 2010, and that "economic recovery is likely to be moderate and fragile".

The German government is currently more optimistic, predicting that the economy will grow 1.4% this year, while the country's central bank expects expansion of 1.6%.

However, the IMF's more cautious opinion is shared by the Organisation for Economic Co-operation and Development, which last week said it expected the German economy to grow by only 1.1% this year.

The IMF now expects the German economy to expand by 1.7% in 2011, down from its previous forecast of 1.9%.

Weak exports

Last year, Chancellor Angela Merkel's government introduced a 81bn euro ($108bn; £72bn) stimulus package, which helped the economy emerge from recession in the second quarter.

However, as Germany is Europe's largest exporter, it is more exposed than other nations to any global economic headwinds.

Recent figures showed that German exports fell 6.3% in January, on a seasonally adjusted basis, compared with December.

However, much of this decline was blamed on Germany experiencing its coldest weather in two decades, which hit the transportation of goods.