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Mon, Feb 21, 2005 - Page 12 News List

Forecasts differ for Germany, Japan

MIXED PICTURE The two countries lagged far behind the economies of the US and the UK, but economists can't agree on whether the picture will change soon

AFP , Paris

Dismal performances by the Japanese and German economies last year, tipping into recession for Japan, highlight structural problems for some analysts but are just a temporary "hiccup" for others.

For the OECD, the figures are disappointing and mean in any case that the recovery of the Group of Seven richest economies will be delayed by a quarter.

However, analysts have also noted that these two lagging economies are pushing out exports successfully and driving up their trade surpluses but are handicapped by weak internal consumption.

This contrasts with some other industrialized countries which have achieved high growth -- the US, Britain and Australia -- but are having trouble on the export side and are running rising trade deficits.

The chief economist at the Organization for Economic Cooperation and Development (OECD), Jean-Philippe Cotis, said at the end of last week that the global recovery, after a disappointingly weak close to the year in a number of G7 countries, would likely "be delayed by a quarter."

He spoke the day after revised data had revealed that the Japanese economy contracted in the last three quarters of last year, and two days after official figures from Germany had shown that the German economy had shrunk by 0.2 percent in the fourth quarter of last year.

By contrast, Britain, widely recognized as being a leader rather than a laggard regarding economic restructuring, reported that unemployment was at the lowest level since June 1975 at 2.6 percent. And US Federal Reserve Chairman Alan Greenspan forecast that the US economy would grow by 3.75-4.0 percent this year.

Economist Jean-Luc Greau, author of The Future of Capitalism, argued that the figures for Japan and Germany were evidence of "significant trends, identified in the 1990s and which were structural in nature."

Greau explained: "Germany is a `world champion' exporter, with a record trade surplus of 155 billion euros (US$201.24 billion) last year, and Japan has the highest surplus for five years of 89.4 billion euros.

"These countries are, on the evidence, very competitive exporters, but they are not able to stimulate their internal economies," said Greau.

The head economist at the German economic institute Ifo, Gernot Neb, held that Germany, the largest economy in Europe, would begin the new year on a firmer footing after the soft end to last year.

"It's a growth hiccup and not the start of a recession," he said.

Forecasts from the OECD show the German economy expanding by 0.5 percent in the first quarter of this year and Japanese output growing by 0.4 percent over the same period.

Economists at French investment bank BNP Paribas, Ryutaro Kono and Caroline Newhouse-Cohen, also expect Japan to recover immediately.

"The Japanese economy hit the bottom in the fourth quarter" and "should bounce back in the first quarter, underpinned by the growth in exports," they said.

But weak consumer spending in both countries -- Germany recently counted its five millionth jobseeker -- continues to hold back expansion.

Meanwhile, the English-speaking and strongly market-orientated economies of the US, Britain and Australia have low unemployment and superior growth.

The US and Britain accumulated record trade deficits last year in a context of high consumer spending and household debt.

Australia's trade deficit also rose to record levels last year, increasing by 0.8 percent to US$25.7 billion. Unemployment fell to a record low rate of 5.3 percent in October.

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