Germany slashed its growth forecast Wednesday, predicting one of the worst recessions in the developed world with a crunching six-percent slump this year, but raised hopes of a recovery in 2010. In its new projections, the government of Europe's biggest economy said that growth was set to creep back into the black next year, with output likely to rise by 0.5 percent.
Berlin is more optimistic for next year than the International Monetary Fund which recently said the country's recession would stretch into 2010, with output contracting by one percent. The latest estimates are a sharp downward revision from the government's projections published last year, which foresaw a contraction of 2.25 percent.
If the six-percent slump is confirmed, only Japan among major economies would suffer a worse recession, with a predicted 6.2-percent decline this year according to the IMF's latest projections. "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 Economy Minister Karl-Theodor zu Guttenberg in a statement.
He said the economy should begin to "bottom out" by the end of 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 German exports plunged by 23.1 percent in February.
However, despite the dire figures, zu Guttenberg rejected the idea that Berlin should implement 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 80 billion euros (105 billion dollars) but was criticised both at home and abroad for being both too slow to act and too conservative.