German growth weakness persists but pessimism unwarranted: Bundesbank

February 27, 2019

FRANKFURT (Reuters) – Germany’s growth weakness has extended into 2019 but the foundations of a rebound remain in place, Bundesbank President Jens Weidmann said on Wednesday in the presentation of the bank’s 2018 annual report.

Growth in Germany, the euro zone’s biggest economy, stalled in the second half of last year and fears are growing that its difficulties may not be as temporary as earlier thought, a potential drag for the entire currency bloc.

The Bundesbank said growth this year will be “well below” its potential rate of 1.5 percent as the dip, which had been expected to end last year, still persists.

“There is much to suggest that the dip in growth here in Germany has persisted into the current year … and that is probably why German economic growth will fall well short of the potential rate of 1.5 percent in 2019,” Weidmann said.

But he said there was no reason for pessimism as the prerequisites for further expansion remain solid, as financing remains cheap, employment is expanding and wages are rising.

The Bundesbank earned a profit of 2.5 billion euros last year and will pay 2.4 billion euros into the German budget, up from 1.9 billion a year earlier.

It is also increasing risk provisions by 1.475 billion euros to bring 17.9 billion euros, the central bank added.

(Reporting by Balazs Koranyi; Editing by Catherine Evans)

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