Germany's Leading Institutes Cut Growth Outlook

Germany's Leading Institutes Cut Growth Outlook

Germany's leading economic research institutes downgraded economic outlook as the euro crisis is putting a strain on the economy.

The think tanks said economic growth will remain weak for the moment and only looks set to recover again slightly over the course of next year.

The institutes lowered 2012 growth outlook to 0.8 percent from 0.9 percent. The institutes forecast 1 percent expansion next year, slower than the 2 percent growth estimated in April.

In the Autumn forecast, leading institutes said the situation in the employment market will deteriorate further, with the number of unemployed set to rise slightly to 2.9 million in 2013.

The report is jointly compiled by the Munich-based Ifo institute, the ZEW institute, the IfW institute, the IWH institute, the RWI institute and Kiel Economics.

They warned that European Central Bank's bond purchase will lead to an increase in inflation expectations. According to think tanks, German inflation will accelerate slightly again due to higher crude oil prices and reach 2.1 percent next year.