The Bundesbank has expressed cautious optimism on the outlook for German growth this year, despite the surprise contraction in gross domestic product in the final quarter of 2004.
'There is no reason to be pessimistic for the current year,' the German central bank wrote in its February monthly report published this morning.
The bank said many consumers and investors appeared to believe that the current stagnation would turn into growth.
'After a year and a half, the German economy is still in the early phase of an economic recovery. Nevertheless, developments in the fourth quarter of last year also show that the economy has started the new year without any momentum,' the report continued.
Germany only narrowly escaped its third recession in four years at the end of last year when GDP contracted by a surprise 0.2% in the final three months of 2004 after stagnating in the third quarter. Recession is technically defined as two consecutive quarters of negative growth.
