The German central bank today confirmed its 2011 economic growth forecast of 'around 3%' but noted several risks to the outlook.
'At present, the underlying German economic trend remains oriented upwards in the second half, though it should slow down a bit,' the Bundesbank said in its monthly report for August. As a result, the bank still expects the biggest European economy to grow by 'around 3%' this year.
In June the bank had been more specific, estimating the economy would expand 3.1%.
'Companies have substantially reviewed lower expectations that were extremely optimistic and orders - aside from large orders - have lost their vigour,' the bank said.
Other factors seen as influencing the outlook included 'uncertainties over the US economy and possible signs of cyclical fatigue in emerging countries,' as well as 'increasing financial markets tension and persistent sovereign debt problems'.
Germany should benefit, however, from strong domestic demand driven by corporate investment, a solid construction sector and falling unemployment, the central bank added.
The German economy grew just 0.1% in the second quarter after a sharp gain of 1.3% in the first as the broader European economy slumped.
Meanwhile, Germany has cut its forecast 2011 budget deficit to 1.5% of GDP from a previous estimate of 2.5% given in July.
Under the terms of the EU Stability and Growth Pact, governments are not supposed to exceed a public deficit of 3% of GDP.
