Germany sharply lowered its growth forecast for next year to 1 percent, from 1.8 percent previously in response to the uncertainty in financial markets, the country's economy minister said Thursday.
At a news conference, Economy Minister Philipp Roesler said that despite the predicted slowdown, the country is not headed for recession. He pointed to the positive growth in the second half of 2011 and that the German economy would grow a robust 2.9 percent in 2011 _ above the 2.6 percent forecast in April. He also noted that unemployment is also standing at a record low and order books are full.
At the same event, Finance Minister Wolfgang Schaeuble said the tax take from the higher than anticipated growth this year would lead to more income from taxes, allowing the government to push through tax cuts worth some euro6 billion ($8.3 billion) to euro7 billion ($9.7 billion) from the start of 2013.
That move would make good on a promise from Chancellor Angela Merkel's government when it took office to ease the burden on German taxpayers.
"We need to do everything to translate the growth that we have enjoyed in this year and the growth that we expect for next year to ease the burden on taxpayers," Roesler said.
The ministry had predicted a 2012 growth rate of 1.8 percent in April. Both ministers said the decision to lower the forecast was a cautious move that reflected the slowing momentum in Germany, with business confidence declining amid turbulence on global financial markets and concern about the eurozone debt crisis.