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Business

Bundesbank: German economy will stagnate through 2010

Europe's largest economy is expected to shrink by 6.2 percent in 2009 according to the Bundesbank, Germany's central bank.

Deutsche Bundesbank bag filled with shredded paper

What happened to the economy?

In it's report for June, the Bundesbank did not have a lot of good news.

"The German economy is currently in a sharp recession," said the Bundesbank.

Overall, it expects the economy to shrink by 6.2 percent which is in line with the predictions from the German government, which said that it expected the economy to contract by 6.0 percent.

"Economic activity is expected to remain at a subdued level in 2010," the report also noted.

Of specific interest are the unemployment statistics.

"More job cuts and a faster rise in unemployment may be expected in the coming quarters," the Bundesbank report said. Their numbers for the future projected unemplyment to rise to 10.5 percent next year. Last month, that number stood at 8.5 percent.

It is forecasting a return to growth in 2010 but at a modest rate of 0.5 percent.

Though the medium term trend seems positive, it expected inflation to be a factor in the coming months and fall into negative territory. Germany's economy grew 1.3 percent in 2008, about half of what it was in 2007.

av/AP/AFP
Editor: Trinity Hartman

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