Oil prices force economists to revise Germany's growth forecast for 2001

Germany's six leading economic institutes have predicted economic growth of 2.7 per cent in the German economy next year. The figure in their annual autumn report published yesterday represents a downward revision from their April forecast of 3 per cent growth, something the institutes attribute to the sharp rise in oil prices and tighter monetary conditions.

But the report stressed it was too early to talk of negative changes, stating German unemployment is expected to fall from 9.2 per cent this year to 8.5 per cent, or 3.6 million, next year.

That is still slightly higher than the predicted euro zone average of 8.3 per cent next year.

The report said a 1970s-type recession was unlikely, pointing to the current low rate of inflation which is predicted to drop to 1.7 per cent in 2001 from 1.9 per cent this year.

In their report, the six leading economics institutes welcomed the recent overhaul of the German tax system and called for similar drastic reform of the German social welfare system as well as deregulation of the employment market.

The federation of medium-sized German companies said it has lowered its expectations for a gradual recovery and has given moderate turnover and profit forecasts for the year 2000. The federation of German industry says the economic upturn will slow during the remainder of the year and in 2001, but that Germany's economy is still expanding.