German upswing at an end 'for now', but no need to splurge: advisers

A construction site is pictured in Berlin, Germany, May 31, 2018. REUTERS/Axel Schmidt

BERLIN (Reuters) - There is no need for a full-blown growth-boosting spending program to deal with the German economy’s downswing, the panel of economists advising the government said on Wednesday, adding that automatic stabilizers should be left to do their work.

In their report to the finance ministry, the five academic advisers said Germany’s constitutional debt brake, often criticized for limiting Berlin’s fiscal room for maneuver, left space for borrowing to help this happen.

“Germany’s long-term upswing has come to an end for now,” the advisers opened their report, in which they cut their growth forecast for next year by a percentage point to 0.9%. “This reflects a global economic slowdown.”

The export-oriented German economy was particularly at risk from a possible escalation of the trade conflicts that are shrouding the global economy in gloom, they said.

The report was released as several industry bodies released data painting a gloomy picture of growth prospects in the high-value exporting industries that underpin Germany’s prosperity.

But the advisers, who include Isabel Schnabel, who will shortly take Germany’s seat on the European Central Bank’s board, said they did not expect a “broad and deep recession”.

German growth would slow to 0.5% this year, accelerating slightly in 2020. They expected growth of 1.2% in the euro area this year and 1.1% in 2020.

Reporting by Thomas Escritt; Editing by Madeline Chambers