Germany predicts it will avoid recession with Q1 growth

EUROPE’S BIGGEST economy will grow by 0.1 per cent in the first quarter of 2012 on the back of a strong labour market, avoiding a feared recession, but its annual expansion will be sharply down from last year, the German government has predicted.

Many economists have forecast Germany would experience a modest recession at the start of this year.

The economy ministry cut its annual growth forecast to 0.7 per cent from a previous 1 per cent and against an impressive 3 per cent for the whole of 2011.

The World Bank warned developing countries to prepare for the “real” risk that an escalation in the euro zone debt crisis could tip the world into a slump on a par with the global downturn in 2008-09.

In a report sharply cutting its world economic growth expectations, the World Bank yesterday said Europe was probably already in recession. If the euro zone debt crisis deepened, global economic forecasts would be significantly lower.

A separate report collating figures from 10 independent research agencies across the EU, including the ESRI, says its economy is likely to stagnate this year, with growth of 1.4 per cent pencilled in for 2013.

However, given the uncertainty surrounding the euro crisis, the report also contains alternative scenarios. A more pessimistic scenario models a deepening of the crisis, leading to a fall in GDP in 2012 of just over 2 per cent and a further fall in 2013 of just over 1 per cent.

The other alternative scenario models the effect of “decisive action” by policy makers leading to a return of confidence in the ability of euro zone governments to meet forthcoming debt obligations; GDP would grow by 0.8 per cent in 2012 and 1.8 per cent in 2013.

Meanwhile, unemployment in Britain rose to the highest rate in 16 years in the quarter through November, deepening concerns it is heading for another recession as turmoil in the euro zone damps the global economic outlook.

The jobless rate, based on International Labour Organisation methods, rose to 8.4 per cent, the highest since January 1996, from 8.1 per cent in the three months through August, the Office for National Statistics said yesterday in London. – (Reuters/Bloomberg)