FRANKFURT (MktNews) - The Kiel-based Institute For Global Economics cut its growth forecasts for Germany and the eurozone again on Wednesday but said it sees no further ECB rate cuts next year.
Kiel cut its German growth forecast to 0.2% this year (from +0.4% projected in September) and to 1.0% in 2003 (down from 1.5% previously). The Kiel growth forecast is now well below the 1.5% projected by the German federal government, meaning the nation will continue to breach the Stability and Growth Pact's deficit limit next year. Kiel projected a German public sector budget shortfall equal to 3.0% of GDP, equalling the Stability Pact limit, though down from 3.6% of GDP this year.
For the eurozone, Kiel left unchanged its GDP forecast of +0.8% this year, but cut its 2003 forecast to 1.5% from 2.3% previously. Kiel also revised up its eurozone HICP inflation forecast to 2.2% this year (from +2.1%) and to 1.7% in 2003 (from +1.6%). The institute also said it expected the ECB to leave rates unchanged in 2003 after its most recent 50 basis point reduction, describing overall eurozone monetary conditions as "favourable." Kiel is one of Germany's six main economic research institutes.