Germany's Institute for World Economics (IfW) on Thursday revised down its 2004 growth forecast for the country's economy amid concerns over the strong euro and what it termed short-term government economic reform.
The Kiel-based IfW, one of Germany's six leading economic think tanks, said it now expected to see Europe's largest economy grow 1.6 percent in 2004, after previously forecasting 1.8 percent.
"The reason for this is the euro appreciation," said IfW economist Alfred Boss. In 2003, the euro rose some 20 percent against the dollar and hit a record high of over $1.29 in February. At 1130 on Thursday, it was trading at around $1.23.
IfW economist Christophe Kamps said German government reforms passed in December, including bringing forward nine billion euros' worth of tax cuts to 2004 from 2005, were too focused on the short term.
"The cuts do not seem to have been crowned with success, because the consumer knows that if welfare spending and government subsidies remain high, the money saved on taxes will just come out of their pocket again at a later stage," he said.
The IfW forecast the eurozone economy would grow two percent in 2005 and Germany would expand 1.2 percent.