MUNICH (AFX) - Germany's economy, dragged down by a recession in the construction sector, is expected to be at the tail end of growth in the euro area in the foreseeable future, the IFO research institute said.
"The overall GDP growth in the euro zone should be nearly 1.9 pct this year and slightly expand at 2.4 pct in 2002. Because of this, Germany will be on the tail-light of the euro zone train in the foreseeable future," it said in a statement.
IFO is forecasting that economic growth in Germany will only be 1.2 pct this year but should improve to 2.2 pct next year.
"Growth in Germany is restrained by structural problems in eastern Germany and the continuing contraction in the construction sector," it added.
On top of these, there are rigidities in the labour market, it said.
"A burden for the overall economy is also the fact that the construction recession, particularly in eastern Germany, is continuing," it said.
It said German exports would recover once the world economy improves, with the weak euro helping to stimulate exports to the U.S. Despite a recovery in the course of this year, growth in exports -- at 5.1 pct in 2001 -- would only be about 50 pct less than last year's 13.2 pct increase, it said.
Private consumption will only be able to support economic growth from late this year and is expected on the average to be better only 1 pct "compared with the last three years and despite the massive tax cuts."
Private consumption growth last year was 1.6 pct and next year, IFO predicts 2.0 pct growth.
Investments in plant and machinery this year will fall 0.1 pct, after growth of 2.4 pct last year, but will rise 2.4 pct next year. Investments made in equipment alone are expected to be 4.5 pct higher this year, after 9.0 pct growth last year and compared with 6.0 pct growth next year.
The rate of increase in Germany's gross investments in plant and machinery will trail behind the overall euro zone, it added.