* German GDP growth seen at 0.9 pct this year
* Euro crisis still main risk for German growth
* Domestic demand and employment seen improving
By Alice Baghdjian
BERLIN, April 19 Germany's leading economic
institutes revised their 2012 growth forecasts upwards slightly
on Thursday, but warned that the debt crisis still haunting the
euro zone remained the biggest threat to growth in Europe's
The eight institutes, whose forecasts form the basis for the
German government's own growth estimates, raised their growth
forecast to 0.9 percent this year, rising to 2.0 in 2013.
In October, they had forecast 0.8 percent growth in 2012.
"After a lull that lasted several months, the German economy
picked up again in spring 2012," the institutes said in their
The institutes said the global economic environment had
brightened slightly since last winter, when the German economy
contracted by 0.2 percent in the final quarter of 2011 on
sagging exports and weak private consumption.
Many economists now think this was a blip, and that
Germany's export driven economy, which bounced back quickly from
the 2008/09 financial crisis, will avoid a recession, generally
defined as two consecutive quarters of contraction.
The institutes forecast a further decrease in unemployment,
following a two-decade low last month, to 6.2 percent in 2013
from 6.6 percent in 2012, already down from 7.1 percent in 2011.
Consumer confidence remained close to a one-year high
heading into April, as Germany's solid labour market has propped
up spending, and surveys point to private consumption as a
bright spot in the economy that can weather any bad news.
German analyst and investor sentiment rose unexpectedly in
April, boosting hopes that Europe's powerhouse is recovering
from a weak spell. The new report said German firms were more
price-competitive now than at any other time in the last 30
years, primarily due to the weakness of the euro.
But risks remain to growth from the euro zone's relentless
debt troubles, as the impact of the European Central Bank's
massive liquidity injections wanes and markets refocus on their
weak banks and difficulties pushing through reforms to spur
"The biggest downside risk to economic development in
Germany remains the debt and confidence crisis in Europe, which
essentially remains unresolved," the institutes said.
"The latest increases in risk premiums for Spanish and
Italian government bonds show that the debt and confidence
crisis continues to smoulder."
The institutes' German inflation forecast for 2012 was
revised upwards to 2.3 percent from an initial estimate of 1.8
percent in October, as oil prices spiked recently due to
tensions between the West and Iran, adding pressure on the ECB
to avoid an interest rate cut.
Balancing policy for Germany's strong economy and the euro
zone's weaker peripheral members was a problem for the ECB for
much of last year, when price growth in Germany helped keep the
overall euro zone figure consistently above target.
In March, German inflation stood at 2.1 percent, above the
ECB target for price stability of close to but just under 2.0
Economists said they expected to see confidence in Germany
on the wane, with the closely watched Ifo index, due to be
published on Friday, forecast to show a fall in business
sentiment, after rising for five months in a row.