BERLIN, March 10 - Germany's DIW research institute said on Wednesday the country's economic recovery is failing to live up to expectations as it slashed its forecast for German growth in the first quarter of 2004. "The economy does not seem to be at the start of a perceptible recovery, particularly as the tax reforms are not providing any essential impulses," the DIW said in a statement. In its monthly 'barometer' on the state of the economy, DIW revised down its forecast for 2004 first quarter gross domestic product (GDP) growth to just 0.1 percent from 0.4 percent. In 2003, GDP in Europe's biggest economy contracted by 0.1 percent. DIW has forecast German GDP will grow by 1.4 percent in 2004 as a whole. In December, the government brought forward to 2004 some nine billion euros in tax cuts originally slated for 2005.
"The German economy is only freeing itself from stagnation in fits and starts; despite the euro's appreciation, it is chiefly being borne by foreign trade impulses," said DIW. DIW's forecast came after data in the past week showed a two percent decline in industrial orders and a slight drop of 0.1 percent in industrial production in January. Gustav Adolf Horn, the institute's chief economist, said data published on Wednesday showing German exports had risen a seasonally adjusted six percent in January from December presented a misleading picture of growth. "Those are big contracts which have already been reflected in the industry orders. No cause for elation. Exports are moving along, but if we're to talk of an economic motor here, then it's a weak motor," said Horn.///