German economic growth will barely strengthen in 2006 amid continuing high oil prices after falling below 1 per cent this year, the country's leading economic institutes forecast today.
In their twice-yearly report, the six institutes forecast GDP would grow 0.8 per cent this year, a tenth of a percentage point higher than they predicted in April - but still only half last year's rate of 1.6 per cent.
The figure would confirm the European Union's largest economy as one of its most sluggish. The institutes said they now expect growth of just 1.2 per cent next year, compared with an earlier estimate of 1.5 per cent.
High oil prices were a key reason for the increased pessimism, the institutes said, noting that their forecasts now assumed the price of Brent crude would average $60 per barrel in 2006, compared with their April estimate of $48.
"Since domestic growth will not be very dynamic in 2006 either, small external disturbances could well throw back the German economy close to stagnation," the think tanks said.
"Thus another big increase in energy prices would have a very negative impact on the German economy, particularly as this would increase the risk of the global economy stumbling."
The German economy contracted by 0.2 per cent in 2003 and barely grew in 2002.