By Andrea Thomas
BERLIN--A leading German institute cut its 2017 growth forecast for the economy Tuesday, saying expansion will be slower next year because of global uncertainties following Donald Trump's election victory and the U.K.'s decision to leave the European Union.
Growing anxiety about the future trade policy of the Trump administration is weighing on German companies' willingness to invest, according to a survey of roughly 2,900 German companies conducted by business-funded IW economic institute in October and November.
"Although Germany's economic expansion will continue next year, the pace will be notable slower due to growing global uncertainties, absent positive effects from falling commodity pricesand due to fewer working days in 2017," IW Managing Director Hubertus Bardt said in a statement.
The institute cut its forecast for German real gross domestic product growth to 1% for 2017, compared with the 1.25% increase predicted in April, and down from the 1.75% growth rate forecast for this year. The German government is more optimistic, predicting 1.4% growth for 2017 after an expected 1.8% expansion for 2016.
IW warned the widening trend of protectionist tendencies in many countries, and mainly comments from President-elect Trump, is bad news for Europe's largest economy.
"Particularly for Germany as a export-oriented country, a protectionist and isolationist course of the U.S. would be a growth risk in the medium- and long-term," IW said. "The same applies to Brexit: Even though the direct impact will be limited for most EU countries in the short-term, the United Kingdom's decision to leave poses a risk to the stability of theEU and the trust in the bloc."
President-elect Trump has in the past expressed strong opposition to establishing a trans-Atlantic free-trade zone with the EU. German companies had hoped that a Transatlantic Trade and Investment Partnership pact, known as TTIP, would make trade between the EU and the U.S. easier.
Germany's traditionally strong export sector is currently weighing on the economy with IW expecting export growth of just 2% next year after an estimated increase of 3% in 2016.
More than 60% of the companies polled said they expect their exports to stagnate, compared with only one in four forecasting growth, while 12% see exports shrinking, the survey found.
The poll also showed that nearly 39% of German businesses expect their overall output to rise next year, while one in two companies predict stagnation and 13% forecast the output to fall.
The growth pillar of Germany's economy will remain private and state consumption, IW said. Private households are continuing to benefit from low interest rates and a robust labor market, while the public sector will continue to provide more money to accommodate and integrate recently arrived refugees, the report said.
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(END) Dow Jones Newswires
November 22, 2016 04:44 ET (09:44 GMT)
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