FRANKFURT (dpa) – Rarely have projections been proven to be so badly off-target. A year ago, Germany’s top economists were predicting real growth of 2.8 per cent for 2001 – after 3.0 per cent in the year 2000.
But month after month, the economists were forced to issue new predictions, revising their estimates further and further.The downward spiral really picked up after the September 11 terror strikes in the United States, so that by the end of 2001, what was left over was something like 0.6 to 0.8 per cent growth for Europe’s largest economy.But now the mood among economists both in Germany and abroad has started to brighten again. The hopes rest in the first instance on the world’s economic locomotive – the U.S. economy.The Organisation for Economic Cooperation and Development (OECD) believes that the massive economic-priming measures after September 11 taken by Washington will amount to 190 billion dollars, or 1.9 per cent of the U.S. gross domestic product.Taken together with the U.S. Federal Reserve’s drastic interest rate reductions, the American economy could rebound in the year 2003 with growth clearly over three per cent, the OECD believes.“Euroland should also then also see growth again of more than three per cent,” said Professor Michael Huether, chief economist of the DGZ-Deka Bank in Germany, referring to the 12-nation single currency sub-group of the European Union. He said there was no cause for “exaggerated fears of recession”.Germany in particular suffered during 2001 from what was a simultaneous downward development in all the important regions of the world. Even before September 11 the economic pace had been clearly slackening, making its effect felt on the strongly export-oriented German economy.“For the first time since the oil crisis of the mid-1970s, the industrial countries experienced a synchronous growth slowdown, the cause of which differed from region to region,” noted Ernst Welteke, president of the German Bundesbank.This helps to account for why economic researchers were so far off the mark. The sharp downturn in the U.S. economy and the effects on the national economies in Europe and Asia were underestimated as were the effects of the high-interest rate policy of the Fed.As a result, Fed chairman Alan Greenspan had to radically alter his policy in 2001, with no fewer than 11 rate reductions.A further factor was the massive loss of purchasing power among consumers caused by exploding oil prices in late 2000-early 2001. Consumption in Germany was also weakened by rising food costs as a result of various animal-disease scares.Amid the slowdown, the hopes that the German economy could somehow detach itself from dependency on the U.S. economy proved to be illusory. So now the hoped-for revival in America is expected to provide a corresponding boost in Europe.And, with oil prices again down below 20 dollars per barrel, consumers’ purchasing power has been given a strong boost. The surprisingly strong Christmas season business, which surpassed even that of the economic boom year 2000, is a signal that, at least among private households, the mood is brightening up.The large export sectors of machinery and electronics are expecting a difficult start in 2002, but this should be followed by a return to their usual strong growth rates in 2003.Even the automotive industry, after another year of record output of 5.3 million cars and vans – after 5.13 million in 2000 – is not expecting to experience a deep crisis. Automobile Industry Association president Bernd Gottschalk believes a production volume of “close to five million cars/vans” to be realistic.Only the hard-hit construction sector is still expected to continue to slow down the overall economy in 2002.In contrast to the previous recessions of 1980-1982 and 1992-1993 which had been preceded by the massive high-interest rate stance taken by the Bundesbank, the conditions for a recovery from the current downturn are more favourable.The rate cuts by the European Central Bank should, after the usual delays, start to provide an additional boost in the second half of 2002. This will mean that after only modest growth of 0.7 to 0.8 per cent for Germany, the year 2003 should – if the economists’ thinking proves accurate – see 2.5 to 2.8 per cent GDP growth.But judging from past experience, even a concrete upswing in the course of 2002 will only start to help out the labour market in the autumn. Joblessness is seen peaking at around 4.3 million in January and February.After the usual seasonal improvement during the summer months, Germany will have some 3.95 million people out of work next September – the month when the country’s next national elections take place.
