Berlin expects Europe’s largest economy to contract by a crushing six percent in 2009 – which would be the most dramatic downturn in Germany since the Great Depression.
“The economic decline that we are expecting this year is predominantly the consequence of the massive global slump and the related massive decline in our exports,” said Guttenberg said at press conference to present the revised forecast.
The latest estimates are a sharp downward revision from official estimates published last year, which predicted a contraction of 2.25 percent.
But Guttenberg also said the government predicted meagre growth to return next year, with the economy likely to expand by 0.5 percent in 2010.
If the six-percent slump comes to pass, Japan would be the only other major industrial nation to suffer worse than Germany in 2009. The International Monetary Fund currently expects the world’s second largest economy to contract by 6.2 percent decline this year.
Germany – the world’s top exporter – has seen demand for its goods dry up as customers around the globe suffer from the financial crisis. Recent data showed exports plunged by 23.1 percent in February.
Despite such dire figures, zu Guttenberg rejected the idea that Berlin should implemented a third stimulus package to inject some life into the economy, arguing it would be “counterproductive.”
Germany has already put into place two stimulus packages worth around €81 billion ($106 billion) but was criticised both at home and abroad for being both too slow to act and too conservative.
These first two packages are “already working,” zu Guttenberg said and a third package would serve only to create more “uncertainty amongst investors, consumers and taxpayers.”
“Sitting on our hands and being morose is the last thing we need now,” said the minister.
As the economy nosedives, jobless lines are set to grow, the Economy Ministry added, with an estimated 3.72 million unemployed this year, growing to 4.62 million in 2010 – the “peak,” according to zu Guttenberg. In 2008, unemployment averaged 2.27 million.