German think-tank sees economy growing only 0.4 per cent next year - Canadian Business

A leading German think-tank is forecasting that the country's economy — Europe's biggest — will grow by only 0.4 per cent next year because of the continent's debt crisis and a cooling global economy.

The forecast Wednesday by the Ifo institute compared with a prediction last month from the government's independent economic advisers that output would expand by 0.9 per cent in 2012. Both forecast growth of 3 per cent this year.

Despite the modest growth, Ifo says Germany's average unemployment rate should edge down to 6.7 per cent from 7.1 per cent in 2011.

Ifo says its forecast that Germany will avoid recession next year is based on the assumption that the eurozone debt crisis doesn't escalate further and Italy, in particular, can continue financing itself in the markets.