IWH cuts 2007 German GDP growth forecast to 0.8 pct vs 1.2; sees 2006 at 2.0 pct

The Institut fuer Wirtschaftsforschung Halle (IWH), one of Germany's six leading economic think tanks, said it cut its 2007 GDP growth forecast to 0.8 pct from 1.2 pct, down from an expected 2.0 pct this year, in part because of the planned increase in value added tax.
Germany's VAT is due to go up to 19 pct from January 2007 from 16 pct.
"The first half of 2007 will no longer show the benefit of early purchases of durable goods," the IWH said in its report.
It said demand for durable goods will rise again in the second half of next year.
The IWH said it expects the economy to grow by 2.0 pct this year, compared with its previous estimate of 1.7 pct.
However, the institute noted that the revision is the result of the German government's recalculation of its statistics in the first quarter and that it does not represent any change in the 2006 economic outlook.
The IWH also said Germany's budget deficit as a percentage of of GDP will decline to 1.8 pct in 2007 from 2.4 pct this year.
"With a deficit percentage of 2.4 pct for the entire year, Germany will meet the Maastricht criteria for the first time in five years," the report said.
The institute also said it expects the 2007 unemployment rate to decline to 10.1 pct from 10.4 pct this year, as the overall number of unemployed falls to 4.395 mln from 4.531 mln.