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Germany at 'risk' of recession
BERLIN, Germany -- Germany, Europe's biggest economy, may have slipped back into recession at the end of 2002 and could continue to contract this year as it struggles with the global downturn. Evidence is mounting that Germany's gross domestic product shrank in the fourth quarter of last year and will be stagnant in the first three months of 2003. The DIW economic institute said in a report on Wednesday that GDP in the fourth quarter likely fell 0.2 percent from the previous quarter. "The German economy lacks momentum and is at risk of drifting into recession,'' the DIW report said. It added that the prospect of a war with Iraq was further crimping Germany's export-driven economy. That warning echoed the findings of the BDB Federal Association of German Banks, which said on Wednesday the economy is unlikely to recover in the foreseeable future. "We can't see chances of a rapid improvement,'' the BDB said in its monthly economic report. The BDB said its figures also indicate that GDP may have contracted in the fourth quarter of 2002. "The German economy remains in a state of profound weakness. After the very weak economic growth in the first three quarters of 2002 GDP, the final quarter is unlikely to have done more than stagnate on a seasonally-adjusted level compared with the previous quarter. "Given the strong decline in industrial production in December 2002, one can't rule out a decline in economic output.'' On Monday, the Bundesbank also said the German economy likely shrank in the last quarter. "By our initial reckoning, real GDP in the fourth quarter of 2002, excluding seasonal and calendar effects, was somewhat lower than in the previous three months,'' the central bank said. "The economy has been in a phase of quasi-stagnation for over two years now. Global slowdown contributed to this and, additionally, Germany is particularly intensively involved in international trade.'' The Federal Statistics Office will release official GDP figures for the fourth quarter of 2002 on February 26. The German economy sank into recession in the second half of 2001 and has recorded only meagre growth in subsequent quarters. The country has been plagued by weak demand and falling prices for its manufactured goods, as well has rising unemployment and nationwide labour disruptions. In its report on Wednesday, the BDB said unemployment was unlikely to stop rising before the end of the year. It added that the loss of jobs would only stop if growth recovers during the second half of 2003 -- "an assumption that rests mainly on hope.''
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