Weak data trims expectations
The first estimate indicates full-year real GDP growth of 3.3% in 2012. We have slightly revised down our forecast for real GDP growth this year to 3.5% from the 3.6% envisaged in the previous edition. In addition to the disappointing Q4 growth figures, industrial production and retail sales data in January were both surprisingly weak. However, the strength of Purchasing Managers Index (PMI) readings casts some doubt over the validity of the industrial production figures.
Our baseline forecast remains that growth will pick up gradually throughout the year, reflecting improvements in the global economic outlook. We think that risks remain skewed to the downside, although the tail risk associated with a Eurozone break-up has receded since the last forecast.
In the medium term, the economy’s poor demographic profile together with a fairly limited pace of policy reform will constrain real GDP growth to around 4%. We think that the risks are broadly balanced. However, if a more ambitious modernization program is implemented, the pace of medium-term growth could be faster.
Contributions to GDP growth
Source: Oxford Economics
Inflation
Source: Federal State Statistics Service; Haver Analytics
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