Germany, economy remains weak but unlikely crisis – ministry


BERLIN (Reuters) – The German economy is unlikely to slide into a prolonged recession even though there is still a phase of weak growth, according to the Ministry of Economy.

The Leipzig plant of the German automaker Porsche. REUTERS / Matthias Rietschel

The economy is expected to contract slightly in the third quarter as between April and June due to the decline in exports due to Brexit uncertainties and the war on duties.

The technical recession expected in the third quarter will come after nine consecutive years of growth, sustained by a strong expansion of exports, mainly in China, and more recently by an increase in consumption thanks also to low interest rates in the euro area.

"A major slowdown or more severe recession is not expected at the moment," the ministry said. "The German industry, focused on exports, is facing weak global trade, stagnant global manufacturing and a decline in demand in the automotive sector."

"The German economy remains stagnant," he added. "Economic activity is at its current level".

Economists have expressed their fears that a slowdown in manufacturing may sooner or later spread to other sectors of Europe's largest economic power, in which even the solid labor market is beginning to suffer the effects of the downturn.

The ministry said that growth in services and construction is largely offsetting the recession in the manufacturing sector, which is heavily dependent on exports.

Chancellor Angela Merkel's government resisted the appeals of those asking for a stimulus package that could counteract the economic slowdown.

The leading German economic institutions have reduced growth estimates to 0.5% this year and to 1.1% in 2020.

Berlin will publish its forecasts this week. In April, estimates indicated an increase of 0.5% in 2019 and 1.5% in 2020.

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