By Christopher Lawton
FRANKFURT--The German economy will return to growth in the first quarter, Germany's central bank said Monday.
The Deutsche Bundesbank's upbeat assessment comes after Germany's federal statistics office, Destatis, said Germany's gross domestic product shrank 0.6% in the fourth quarter from the third. That dip could be short-lived, however, as the Bundesbank forecasts a gradual economic recovery in the euro zone's largest economy on the horizon through the course of this year.
"Economic expectations for the German economy have rather quickly and remarkably recovered in the past three months," the Bundesbank says in its monthly report, adding that it sees now an increase in the country's GDP in the first quarter.
Germany's central bank cited the reduced uncertainties in the euro zone as having contributed to the more positive outlook and an increasing likelihood that investment in Germany is set to improve.
"The chances have increased that the conspicuous investment moratorium could end gradually," it said.
The Bundesbank's comments echo those of its president, Jens Weidmann, who said over the weekend after a meeting of the Group of 20 industrial and developing nations in Moscow that the German economy should pick up "considerably" by the end of March.
Evidence is also pointing to increasing momentum in the global economy, the Bundesbank said. The central bank mentioned the European Central Bank's Outright Monetary Transactions program and the European Union's efforts to centralize banking supervision under the watch of the ECB as calming influences on the market, but warned that the eased financial tensions should not deter countries from making much needed structural reforms.
The Bundesbank also noted in its monthly report the euro's recent rise in value against the Japanese yen, just as the Group of 20 pledged on Saturday to refrain from targeting their currency policies to gain a competitive advantage.
Write to Christopher Lawton at [email protected]