Germany's economy will grow less than previously forecast this year and next as a slowing global economy and the euro zone's debt crisis take their toll, two research institutes said.
The German economy steamed ahead in the first three months of the year and saved the euro zone from recession by growing 0.5%.
But growth slowed to 0.3% in the second quarter due to a sharp drop in investment.
The IfW, or Kiel Institute for the World Economy, said it had lowered its growth forecast for 2012 to 0.8% from 0.9% and its 2013 view to 1.1% from 1.7% as global conditions remain poor and German companies postpone investments.
The Halle-based IWH institute cut its forecasts to 0.9% for 2012 and 0.8% for 2013. In March it had forecast growth of 1.3% and 2.2%.
The state of the German economy and its prospects are significantly worse than they were six months ago, IWH said in a statement.
''The main reason for this is that the debt and confidence crisis keeps spawning new episodes. That weakens sentiment and expectations and companies are increasingly feeling the effects of the crisis," it said.
''Demand from the rest of the euro zone, the main sales market for German products, has been falling since mid-2011 and at a heightened pace since spring. The global economy has, however, also generally lost momentum," it said, pointing to slowing growth in emerging economies such as China, recession in
Britain and the slowing US recovery.
Recent data from Germany has been mixed - exports, imports and industrial production have all climbed but the private sector shrank for a fourth month in a row in August. Sentiment surveys have also taken a turn for the worse.
IWH said the economy would grow in the third quarter before stagnating at the end of 2012 and the beginning of next year. IfW said there were no signs of a recession in Germany yet but added that a renewed flare-up in the euro zone crisis was having a considerable dampening effect on the German economy.
Some economists have said the German economy could shrink in the third and possibly fourth quarters and Economy Minister Philipp Roesler said today that the weaker global economic environment would not leave Germany unscathed, adding that he expected a slowdown this year and next.
Uncertainty over the crisis and the lack of clarity about future economic policy in the single currency bloc means firms are holding back on investments, IfW said.
"Above all investors feel insecure and are postponing projects even though financing conditions continue to be very favourable," the institute said, adding that economic developments in the second half of 2012 would be noticeably less dynamic than in the first six months.
Germany's RWI economic think tank cut yesterday its 2012 growth forecast to 0.8% from 1.1% and halved its 2013 forecast to 1%.
