One of Germany's leading research institutes today warned of further stagnation in the German economy and cut its forecast for GDP growth for 2003 from 1pc to just 0.6pc. The Rheinisch-Westfaelischen Institut fuer Wirtschaftsforschung (RWI), however, has predicted that growth will pick up to 2.0pc in 2004 as income tax reforms stimulate consumer spending and the world economy starts to recover. The RWI also forecast that the eurozone will record GDP growth of 1.3pc this year and 2.4pc in 2004.
The RWI's findings come after Germany's central bank recently took a more pessimistic view and said that the country's economic slump may not be over for some time. "The possibility of a protracted period of weakness accompanied by low capacity utilisation and rising unemployment cannot be ruled out," the Bundesbank said in a statement last week. //www.fxcentre.com