Germany's export-oriented economy will be dragged down by the financial crisis next year and contract by 2.2%, the Ifo economic institute forecast today.
'The German economy, which because of its trade orientation had benefited from the strong upswing in the global economy, now conversely is being pulled under by the financial crisis', an Ifo statement said.
'On average for the year, real GDP will decline by 2.2%. In the wake of the world recession, exports will be reduced drastically,' it added.
Berlin's current forecast for next year is for 0.2% growth but with Germany having already entered a technical recession in the third quarter, many economists have already issued much bleaker forecasts.
Tthe German central bank has estimated that Europe's biggest economy will shrink 0.8% in 2009. For 2008, the government sees growth of 1.7%, while Ifo put it lower at 1.5%.
Ifo said that 'stabilisation is not expected until 2010, with the gradual subsiding of the financial crisis,' with the economy likely to contract 0.2% that year.
In October, a group of leading institutes, of which Ifo is a member, forecast 1.8% growth in 2008 and 0.2% growth in 2009.
The Germany economy contracted in the second and third quarters of 2008 however, plunging the country into a technical recession that many expect to be deep and prolonged.
