Germany cuts 2013 growth forecast to 0.4% from 1% predicted in October, citing weak winter, predicts 2014 growth of 1.6%

Cindy Allen

BERLIN , January 16, 2013 (Thomson Reuters) – * Trade expected to subtract 0.1 pct points from 2013 GDP

* Consumer demand, fuelled by higher wages, to support growth

* Minister says Germany feeling burden of euro crisis (Adds detail, background, quotes)

Export powerhouse Germany expects foreign trade to be a drag on economic output this year as the euro zone crisis saps demand in neighbouring states, although consumers at home should support growth.

Exports will likely grow by 2.8 percent this year while imports will probably climb by 3.5 percent, a result which would subtract 0.1 percentage points from gross domestic product (GDP), the Economy Ministry said on Wednesday in its annual report. In 2012, trade boosted GDP by 1.1 percentage points.

"The German economy is increasingly feeling the burden of weaker global economic development and in particular the crisis of confidence in the euro zone," Economy Minister Philipp Roesler said.

Germany has traditionally been an export-driven economy but shipments abroad have declined as some countries in the euro zone, where Europe's economic powerhouse sends 40 percent of its exports, linger in recession and markets further afield like the US and China suffered a slowdown.

Roesler said exports had been driven by demand from non euro zone countries and added that he expected that to continue.

This year private consumption is seen contributing 0.6 percentage points to GDP as the labour market remains robust, wages rise further and inflation continues to be moderate.

The ministry slashed its growth forecast for 2013 to 0.4 percent from the 1.0 percent it had predicted in October, blaming a weak winter half-year.

"The 0.4 percent will quickly be replaced by a better growth rate in 2014 of 1.6 percent, which shows that the German economy is not just robust but at the vanguard in terms of the labour market and growth... This is why we are absolutely optimstic," Roesler told a news conference.

Germany's economy shrunk by 0.5 percent in the fourth quarter of 2012, preliminary data showed this week, its worst quarterly performance since Germany fell into a recession during the global financial crisis in 2008/2009. The weak final quarter dragged the overall growth figure for last year down to 0.7 percent.

But Roesler said this period of weakness would probably be "temporary" and growth would pick up in the course of 2013, largely driven by domestic demand.

"We are not completely decoupled from our European partners and neighbours, even though we may be stronger in terms of growth," said Roesler. "Our growth rates have been reduced because of the developments in the euro zone."

Until last year Germany had seemed impervious to the euro zone's troubles, growing by a post-reunification record 4.2 percent in 2010 and by 3 percent in 2011 even as some of its peers sought bailouts and found themselves mired in recession.

Most economists see the German economy starting 2013 on a weak footing but avoiding a recesssion - defined as two consecutive quarters of contraction - before it regains some momentum.

Recent data have painted a mixed picture of the economy. Orders, exports and imports have all slid and the manufacturing sector is shrinking. But sentiment surveys have improved and the private sector expanded for the first time in eight months in December. (Writing by Michelle Martin in London; additional reporting by Sarah Marsh and Alexandra Hudson in Berlin; Editing by Noah Barkin)

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