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Economy

Bundesbank sees German economy shrinking

Germany's central bank expects economic activity to contract at the end of 2012, seeing months of moderate but steady growth come to an end. However, the Bundesbank is convinced the drop in German GDP will be brief.

Germany's gross domestic product (GDP) would shrink "significantly" at the end of 2012 with the contraction expected to last for the remaining months of winter, Germany's central bank said in its December report published Monday.

The report didn't give a figure for the expected decline in GDP, saying only that growth prospects had clouded, as a result of the eurozone debt crisis and falling industrial output on the back of weak global demand.

However, the Bundesbank also said that there was sufficient reason to believe that the economic weakness would not last for long, and that Germany would begin to grow again next year.

"The robust health of the economy will prevent major damage, notably to the labor market," the report said.

Nevertheless, the 2013 growth rate forecast by the central bank would come in at just 0.4 percent, falling short of the overall rate of 0.7 percent it expected to reach in 2012.

In addition, inflation was seen falling to 1.5 percent in 2013 from 2.1 percent this year, the bank said.

uhe/hc (Reuters, dpa)