BERLIN, Oct 8 - The German government is to cut its economic growth forecast for the current year from 0.75 percent to show either zero growth or a slight rise of 0.25 percent, the Frankfurter Allgemeine Zeitung said on Wednesday. Citing government sources, the newspaper said the latest forecast had not yet been decided but the new figure would effectively show the economy in stagnation, in line with the forecasts of most outside economists. No comment was immediately available from the government, which is due to publish official forecasts on October 23. Germany's economy grew 0.2 percent in 2002, its slowest rate since 1993, and most private sector economists expect zero growth this year after the economy contracted in the first half. Germany's six leading economic institutes will publish their next semi-annual forecasts on October 21.
The institutes have cut their individual forecasts for 2003 to zero. Some have raised their forecasts for 2004, following the announcement by the government of plans to bring forward tax cuts, but they still see growth falling short of two percent. The paper said Finance Minister Hans Eichel would announce additional new borrowing of 23 billion euros when he presents a supplementary budget in the coming weeks, lifting new borrowing to 41 billion euros from an original 18.9 billion euro goal. The paper said the new federal borrowing, combined with debt from regional and local government, would lift Germany's 2003 public sector deficit to over four percent of gross domestic product, higher than the 3.8 percent forecast by the government. Germany has breached European Union rules limiting public sector deficits to three percent of GDP for two years in a row and has said it will be hard to keep the 2004 deficit below the limit.//