The German government sharply cut its growth forecast for next year, citing the impact of the economic crisis in Eurozone.

The growth projection for 2012 was slashed to 1 percent from 1.8 percent seen in April. The forecast for this year, however, was lifted to 2.9 percent from 2.6 percent.

Economy Minister Philipp Roesler said the growth path has slowed as risks from the international environment has increased significantly. The increased uncertainty due to the debt crisis in many countries has also significantly dampened global economic growth. The minister also ruled out any chance of recession in the biggest Eurozone economy.

Next year, German growth is expected to be largely driven by domestic demand, the government report said. Inflation is forecast to remain high due to energy costs. The figure is forecast at 2.3 percent this year and 1.8 percent next year.

Unemployment is expected to remain below the three million mark this year. The jobless rate is seen at 7 percent this year and 6.7 percent in 2012.

Exports are expected grow 7.5 percent this year, but to increase only 3.5 percent next year. In April, the ministry had forecast 6.5 percent growth for 2012.

Last week, leading economic think tanks in Germany also cut their growth forecast for next year. The institutes now expect the economy to grow 0.8 percent in 2012, much weaker than the earlier projection of 2 percent. This year, the economy is seen expanding 2.9 percent, faster than the earlier forecast of 2.8 percent.

RTTNews