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Germany not facing recession: Steinbrueck

Filed on September 2, 2008

BEIJING - Germany's economy is set to grow by about 1.7 percent this year, a lower rate than in previous years, but it is not facing a recession, Finance Minister Peer Steinbrueck told Reuters on Tuesday.

"I expect 1.7 percent," Steinbrueck said when asked about Germany's growth prospects for this year, sticking to his forecast from the start of the year for Europe's biggest economy.

"That's not bad. Of course it is not quite as good as what we saw in 2006 or 2007, but it is not a recession," Steinbrueck told Reuters on a trip to China.

Figures released last week showed German gross domestic product (GDP) contracted by 0.5 percent in the second quarter. The contraction was Germany's first since 2004.

Other economic indicators have compounded concern that the economy will sink into recession, which is defined as at least two consecutive quarters of contraction.

The Munich-based IFO economic institute has said its German business climate index fell to a three-year low in August and retail sales data has highlighted lacklustre domestic demand.

Analysts say Germans' angst about inflation has led them to hold down their spending in recent months.

Asked about inflation concerns, Steinbrueck said: "I consider inflation to be a very serious problem in the medium-term, (but) not a specifically German situation."

For a story on Steinbrueck's comments on China, please click on [nBJB000478].

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